Tax Facts 2017 - PwC Ireland – Professional services · Tax and Legal Services Leader. Ta acts 2017 2 Tax Facts 2017 – Editor’s page Welcome to the latest edition of Tax Facts

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The essential guide to Irish tax

Tax Facts2017

iiTax Facts 2017

Index

iiiTax Facts 2017

Index

1Tax Facts 2017

Tax Facts 2017 - The essential guide to Irish tax

Introduction This publication is a practical and easy-to-follow guide to the Irish tax system. It provides a summary of Irish tax rates as well as an outline of the main areas of Irish taxation. A list of PwC contacts is provided within each tax area and at the back of this guide should you require more detailed advice or assistance tailored to your specific needs.

Joe Tynan Tax and Legal Services Leader

2Tax Facts 2017

Tax Facts 2017 – Editor’s pageWelcome to the latest edition of Tax Facts which has been updated for amendments brought about by Finance Act 2016 which was signed into law on 25 December 2016.

From a personal tax perspective, the principle changes are in the form of a reduction in the Universal Social Charge (USC) rates. To assist mobile employees, Special Assignee Relief Programme (SARP) and the Foreign Earnings Deduction (FED), have both been extended to the end of 2020. There has also been a reduction in the minimum number of qualifying days required to be spent abroad to avail of the FED.

To encourage entrepreneurship, the special Capital Gains Tax rate applying to individuals on disposals of certain qualifying business assets has been further reduced from 20% to 10%. The rate remains subject to a lifetime limit on qualifying disposals of €1 million.

Finance Act 2016 has also introduced new provisions restricting the tax deductibility of profit participating interest payable by companies within the securitisation tax regime (known as Section 110 companies) on certain loans and similar assets which derive their value, or the greater part of their value, from Irish real estate.

The Act also introduced a new type of fund, an Irish Real Estate Fund (“IREF”), being a fund where 25% or more of the market value of assets is derived from Irish land or buildings. Subject to some reliefs and exceptions, 20% withholding tax must be operated by the fund on distributions of income.

From a residential property perspective, a “Help to Buy” scheme has been introduced with the aim of assisting first-time buyers to buy / self-build a new home by allowing for a refund of income tax and DIRT paid in the prior four tax years. The refund is available up to a maximum of €20,000, subject to certain criteria.

The Act also introduced measures to restore full interest deductibility for landlords of residential properties on a phased basis, starting in 2017. This deduction had previously been restricted to 75% of the interest paid.

Fiona Carney Senior Manager Tax Solutions Centre

For more information contact:

Fiona Carney Senior Manager t: 353 (0)1 792 6095 e: [email protected]

3Tax Facts 2017

Corporation taxCorporation tax is charged on the worldwide profits of companies that are tax resident in Ireland and certain profits of the Irish branches of non-resident companies. ‘Profits’ for this purpose consist of income (business or trading income comprising active income and investment income comprising passive income) as well as certain capital gains.

Corporation tax rates

Rate

12.5% Trading income (including qualifying foreign dividends paid out of trading profits but excluding income of excepted trades)

25% All other income, including income of excepted trades a, non-trading income and non-qualifying foreign dividends

33% Capital gains

perations or activities which are excepted operations. Excepted operations include working scheduled minerals, mineral compounds or mineral substances, working minerals, petroleum activities, and dealing in or developing land (other than such part which consists of construction operations). Special tax provisions apply to certain petroleum exploration licences granted after 1 January 2007 which increase the maximum rate of tax payable on productive fields from 25% to 40%. A new Petroleum Production Tax has been introduced for certain licences granted on or after 18 June 2014 which increase the maximum rate of tax payable on profits from productive fields from 40% to 55%.

LossesA trading loss incurred in an accounting period may be offset against any of the following:

• trading income (including certain foreign dividends taxable at the 12.5% rate) arising in the same period

• trading income of the immediately preceding period

• trading income of subsequent periods (to the extent that the same trade is carried on).

To the extent not usable against trading income, a trading loss can be converted into a tax credit which may be used to reduce the corporation tax payable on passive income and chargeable gains of the same period and the immediately preceding period.

Alternatively, group relief may be claimed whereby one group company is entitled to surrender its trading loss to another member of the same group. Both the claimant company and the surrendering company must be within the charge to Irish corporation tax. To form a group for corporation tax purposes, both the claimant company and the surrendering company must be resident in an EU country or an EEA country with whom Ireland has a double taxation agreement (‘EEA treaty country’). In addition, one company must be a 75% subsidiary of the other company, or both companies must be 75% subsidiaries of a third company. The 75% group relationship can be traced through

companies resident in a ‘relevant territory’ being the EU, an ‘EEA treaty country’ or another country with whom Ireland has a double taxation agreement. In addition, in determining whether one company is a 75% subsidiary of another company for the purpose of the group relief provisions, the other company must either be resident in a ‘relevant territory’ or quoted on a recognised stock exchange in a ‘relevant territory’ or on another stock exchange approved by the Minister for Finance.

Branch incomeAs above, Irish branches of foreign companies are liable to corporation tax at the rates that apply to Irish resident companies. No tax is withheld on repatriation of branch profits to the head office.

Company ResidenceA company is generally regarded as Irish tax-resident if it is managed and controlled in Ireland. This is the case irrespective of its place of incorporation.

Furthermore, the legislation provides that an Irish incorporated company is to be regarded as Irish tax resident unless it falls within certain exceptions. The scope of these exceptions has been scaled back significantly in recent Finance Acts in response to international concerns raised regarding their implications.

Under the Finance Act 2014 provisions, an Irish incorporated company will be regarded

Business taxation

3Tax Facts 2017 3Tax Facts 2016

Corporation taxCorporation tax is charged on the worldwide profits of companies that are tax resident in Ireland and certain profits of the Irish branches of non-resident companies. ‘Profits’ for this purpose consist of income (business or trading income comprising active income and investment income comprising passive income) as well as certain capital gains.

Corporation tax rates

Rate

12.5% Trading income (including qualifying foreign dividends paid out of trading profits but excluding income of excepted trades)a

25% All other income, including income of excepted tradesa, non-trading income and non-qualifying foreign dividends

33% Capital gains

a an excepted trade is a trade consisting of trading operations or activities which are excepted operations. Excepted operations include working scheduled minerals, mineral compounds or mineral substances, working minerals, petroleum activities, and dealing in or developing land (other than such part which consists of construction operations). Special tax provisions apply to certain petroleum exploration licences granted after 1 January 2007 which increase the maximum rate of tax payable on productive fields from 25% to 40%. A new Petroleum Production Tax has been introduced for certain licences granted on or after 18 June 2014 which increase the maximum rate of tax payable on profits from productive fields from 40% to 55%.

LossesA trading loss incurred in an accounting period may be offset against any of the following:

• trading income (including certain foreigndividends taxable at the 12.5% rate) arisingin the same period

• trading income of the immediatelypreceding period

• trading income of subsequent periods (tothe extent that the same trade is carried on).

To the extent not usable against trading income, a trading loss can be converted into a tax credit which may be used to reduce the corporation tax payable on passive income and chargeable gains of the same period and the immediately preceding period.

Alternatively, group relief may be claimed whereby one group company is entitled to surrender its trading loss to another member of the same group. Both the claimant company and the surrendering company must be within the charge to Irish corporation tax. To form a group for corporation tax purposes, both the claimant company and the surrendering company must be resident in an EU country or an EEA country with whom Ireland has a double taxation agreement (‘EEA treaty country’). In addition, one company must be a 75% subsidiary of the other company, or both companies must be 75% subsidiaries of a third company. The 75% group relationship can be traced through

companies resident in a ‘relevant territory’ being the EU, an ‘EEA treaty country’ or another country with whom Ireland has a double taxation agreement. In addition, in determining whether one company is a 75% subsidiary of another company for the purpose of the group relief provisions, the other company must either be resident in a ‘relevant territory’ or quoted on a recognised stock exchange in a ‘relevant territory’ or on another stock exchange approved by the Minister for Finance.

Branch incomeAs above, Irish branches of foreign companies are liable to corporation tax at the rates that apply to Irish resident companies. No tax is withheld on repatriation of branch profits to the head office.

Company ResidenceA company is generally regarded as Irish tax-resident if it is managed and controlled in Ireland. This is the case irrespective of its place of incorporation.

Furthermore, the legislation provides that an Irish incorporated company is to be regarded as Irish tax resident unless it falls within certain exceptions. The scope of these exceptions has been scaled back significantly in recent Finance Acts in response to international concerns raised regarding their implications.

Under the Finance Act 2014 provisions, an Irish incorporated company will be regarded

Business taxation Index

Welcome

Transfer Pricing

Financial Services

Corporate - withholding taxes (WHT)

Tax treaties

Value added tax (VAT)

Stamp duty

Relevant contracts tax (RCT)

Interest

Local Property Tax

Income tax

Employee taxation

Employee share schemes

PRSI

Universal Social Charge

Pension schemes

Capital gains tax

Capital acquisitions tax

Local taxes

Customs and excise

Tax contacts

Appendix 1 Withholding tax onpayments from Ireland

Appendix 2 Withholding tax onpayments to Ireland

Introduction

Business taxation

Index

Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts

Appendix 1 Withholding tax on payments from Ireland

Appendix 2 Withholding tax on payments to Ireland

Introduction

Business taxation

4Tax Facts 2017

as Irish tax resident. To ensure alignment with the treatment of company residence in double tax agreements, there is one exception only to this incorporation rule. If, under the provisions of a double tax agreement, an Irish incorporated company is regarded as tax resident in another territory, the company will not be regarded as Irish tax resident.

Previously, there was also an exception where the company concerned or a related company carries on a trade in Ireland and either (i) the company is ultimately controlled by persons resident in the EU or another territory with whom Ireland has a double taxation agreement (‘treaty territory’) or (ii) the company or a related company is quoted on a recognised stock exchange. However, Finance Act (No 2) 2013 introduced a measure to ensure that this exception would not apply if it resulted in an Irish incorporated company being regarded as ‘stateless’ in terms of its tax residence by virtue of a mismatch between Ireland’s and another country’s residence rules. The measure provides that, where an Irish incorporated company is managed and controlled in an EU or treaty territory and would not be regarded as tax-resident in any territory because (i) it is not managed and controlled in Ireland, and (ii) it is not resident in that other territory because it is not incorporated in that territory, the company will be regarded as Irish tax-resident. This measure has effect from 23 October 2013 for companies incorporated in Ireland on or after this date and from 1 January 2015 for companies incorporated in Ireland before 23 October 2013.

Application of Finance Act 2014 provisions to Irish incorporated companies

The Finance Act 2014 provisions outlined above have effect from 1 January 2015 for companies incorporated in Ireland on or after 1 January 2015. For companies incorporated before that date, a transitional period applies, meaning that the provisions apply only from the earlier of either:

(a) 1 January 2021, or

(b) the date, after 1 January 2015, of a change in ownership of the company in circumstances where there is also a major change in the nature or conduct of the business of the company within the period which begins one year before the date of the change of ownership (or on 1 January 2015, whichever is later) and ends five years after that date.

The previous corporate tax residence provisions outlined above therefore continue to apply to companies incorporated before 1 January 2015 until 31 December 2020 at latest.

In the period to 31 December 2020, all groups will need to carefully monitor the corporate tax residence position of Irish incorporated, non-resident companies which do not satisfy the sole exception contained within the Finance Act 2014 provisions. This includes, for example, considering the impact of any proposed M&A transactions involving both change in ownership and business changes/integration measures.

R&D creditIreland’s R&D tax credit is a very attractive relief and provides an overall effective corporation tax deduction of 37.5% on certain R&D expenditure. The types of expenditure which can be subject to this credit include both revenue and capital expenditure. R&D expenditure qualifies for a tax credit of 25% in addition to the normal deduction for R&D expenditure (12.5%).

Historically the credit was designed to incentivise incremental R&D expenditure, with 2003 fixed as the base year. Where a company did not have R&D expenditure in 2003 then the relief is calculated on the actual qualifying expenditure incurred in the accounting period under review. This volume based approach has been extended to all companies for accounting periods commencing after 1 January 2015.

The R&D credit can be used to generate a tax refund through a carryback against prior year profits. In addition, repayment for excess credits is available over the course of a three-year cycle. Repayments are limited to the greater of (a) the corporation tax payable by the company in the preceding ten years or (b) the payroll tax liability for the period in which the relevant R&D expenditure is incurred and the prior year (subject to an adjustment dependent upon previous claims).

In addition, companies have the ability to account for the credit “above the line” in the Profit & Loss account, thereby reducing the unit cost of R&D, which is a key measurement used when considering where to locate R&D

Business taxation


as Irish tax resident. To ensure alignment with the treatment of company residence in double tax agreements, there is one exception only to this incorporation rule. If, under the provisions of a double tax agreement, an Irish incorporated company is regarded as tax resident in another territory, the company will not be regarded as Irish tax resident.

Previously, there was also an exception where the company concerned or a related company carries on a trade in Ireland and either (i) the company is ultimately controlled by persons resident in the EU or another territory with whom Ireland has a double taxation agreement (‘treaty territory’) or (ii) the company or a related company is quoted on a recognised stock exchange. However, Finance Act (No 2) 2013 introduced a measure to ensure that this exception would not apply if it resulted in an Irish incorporated company being regarded as ‘stateless’ in terms of its tax residence by virtue of a mismatch between Ireland’s and another country’s residence rules. The measure provides that, where an Irish incorporated company is managed and controlled in an EU or treaty territory and would not be regarded as tax-resident in any territory because (i) it is not managed and controlled in Ireland, and (ii) it is not resident in that other territory because it is not incorporated in that territory, the company will be regarded as Irish tax-resident. This measure has effect from 23 October 2013 for companies incorporated in Ireland on or after this date and from 1 January 2015 for companies incorporated in Ireland before 23 October 2013.

Application of Finance Act 2014 provisions to Irish incorporated companies

The Finance Act 2014 provisions outlined above have effect from 1 January 2015 for companies incorporated in Ireland on or after 1 January 2015. For companies incorporated before that date, a transitional period applies, meaning that the provisions apply only from the earlier of either:

(a) 1 January 2021, or

(b) the date, after 1 January 2015, of a changein ownership of the company in circumstanceswhere there is also a major change in thenature or conduct of the business of thecompany within the period which begins oneyear before the date of the change ofownership (or on 1 January 2015, whicheveris later) and ends five years after that date.

The previous corporate tax residence provisions outlined above therefore continue to apply to companies incorporated before 1 January 2015 until 31 December 2020 at latest.

In the period to 31 December 2020, all groups will need to carefully monitor the corporate tax residence position of Irish incorporated, non-resident companies which do not satisfy the sole exception contained within the Finance Act 2014 provisions. This includes, for example, considering the impact of any proposed M&A transactions involving both change in ownership and business changes/integration measures.

R&D creditIreland’s R&D tax credit is a very attractive relief and provides an overall effective corporation tax deduction of 37.5% on certain R&D expenditure. The types of expenditure which can be subject to this credit include both revenue and capital expenditure. R&D expenditure qualifies for a tax credit of 25% in addition to the normal deduction for R&D expenditure (12.5%).

Historically the credit was designed to incentivise incremental R&D expenditure, with 2003 fixed as the base year. Where a company did not have R&D expenditure in 2003 then the relief is calculated on the actual qualifying expenditure incurred in the accounting period under review. This volume based approach has been extended to all companies for accounting periods commencing after 1 January 2015.

The R&D credit can be used to generate a tax refund through a carryback against prior year profits. In addition, repayment for excess credits is available over the course of a three-year cycle. Repayments are limited to the greater of (a) the corporation tax payable by the company in the preceding ten years or (b) the payroll tax liability for the period inwhich the relevant R&D expenditure isincurred and the prior year (subject to anadjustment dependent upon previous claims).

In addition, companies have the ability to account for the credit “above the line” in the Profit & Loss account, thereby reducing the unit cost of R&D, which is a key measurement used when considering where to locate R&D


Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Business taxation

Index

Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Business taxation

5Tax Facts 2017

projects. This is extremely helpful to Irish subsidiaries of multinational corporations in terms of being able to compete with lower cost jurisdictions.

Outsourcing limits

The incentive is directed towards in-house activities and as such there are outsourcing limits for sub-contracted R&D costs. This limit has been increased over the years to 15%. The increase is particularly aimed at smaller companies that do not have access to the required R&D expertise in-house. Further legislative enhancement in respect of externally provided workers and collaborations that are under the control and direction of the relevant R&D company would be welcome (please see Revenue Guidelines below for further commentary).

Revenue Guidelines

The most recently published Irish Revenue R&D tax credit guidelines include a number of positive comments. These updates include more detailed commentary on the type of software development activities undertaken that may potentially qualify for the credit and provide that costs incurred related to individual consultants may not be subject to the outsourcing limits once certain conditions have been satisfied. There is also confirmation regarding the treatment of base year expenditure in change of ownership situations. However companies should be aware that there is increased focus on the documentation required to support a valid claim and some new statements that will

undoubtedly result in Revenue seeking to restrict certain costs that have typically been claimed bthe expenditure is incurred.

Intellectual property tax deductionCompanies acquiring Intellectual Property (IP) can avail of significant deductions on certain capital expenditure. Tax depreciation is available for capital expenditure incurred on the acquisition of qualifying IP assets. The deduction is equivalent to the amortisation or depreciation charge on the IP included in the accounts. Alternatively, a company can elect to claim tax deductions over 15 years, at a rate of 7% per annum and 2% in the final year.

The definition of IP assets includes the acquisition of, or the licence to use:

• patents and registered designs

• trademarks and brand names

• know-how

• domain names, copyrights, service marks and publishing titles

• authorisation to sell medicines, a product of any design, formula, process or invention (and any rights derived from research into same)

• goodwill, to the extent that it is directly attributable to qualifying assets

The range of qualifying intangible assets also includes applications for legal protection (for example, applications for the grant or registration of brands, trademarks, patents, copyrights etc).

Tax deductions are available for offset against income generated from exploiting IP assets or as a result of the sale of goods or services, where the use of IP assets contributes to the value of such goods or services.

For all accounting periods beginning before 1 January 2015, the aggregate deduction and related interest expense which could be claimed in a given year could not exceed 80% of the related IP profits of the company as computed before such deductions. Finance Act 2014 provides for an increase in this cap from 80% to 100% of those profits with effect for accounting periods beginning on or after 1 January 2015. Any excess deductions can be carried forward and offset against IP profits in succeeding years. This change will enable many companies to claim the allowances and related interest over a shorter period and will also serve to simplify the calculation of allowances.

In addition to the above change, the list of specified intangible assets on which capital allowances may be claimed was extended by Finance Act 2014 to include customer lists acquired otherwise than “directly or indirectly in connection with the transfer of a business as a going concern”.

Finance Act 2014 also provides that no balancing charge will arise where an intangible asset on which allowances have been claimed is sold on or after 23 October 2014 and the sale takes place more than five years after the beginning of the accounting period in which the asset was acquired. In the case of a transfer to a connected company, the

Business taxation


projects. This is extremely helpful to Irish subsidiaries of multinational corporations in terms of being able to compete with lower cost jurisdictions.

Outsourcing limits

The incentive is directed towards in-house activities and as such there are outsourcing limits for sub-contracted R&D costs. This limit has been increased over the years to 15%. The increase is particularly aimed at smaller companies that do not have access to the required R&D expertise in-house. Further legislative enhancement in respect of externally provided workers and collaborations that are under the control and direction of the relevant R&D company would be welcome (please see Revenue Guidelines below for further commentary).

Revenue Guidelines

The most recently published Irish Revenue R&D tax credit guidelines include a number of positive comments. These updates include more detailed commentary on the type of software development activities undertaken that may potentially qualify for the credit and provide that costs incurred related to individual consultants may not be subject to the outsourcing limits once certain conditions have been satisfied. There is also confirmation regarding the treatment of base year expenditure in change of ownership situations. However companies should be aware that there is increased focus on the documentation required to support a valid claim and some new statements that will

undoubtedly result in Revenue seeking to restrict certain costs that have typically been claimed by companies to date.

Planning tip!

Ensure you avail of the cash refund available on excess R&D tax credits. Claims must be made within 12 months of the end of the period in which the expenditure is incurred.

Intellectual property tax deductionCompanies acquiring Intellectual Property (IP) can avail of significant deductions on certain capital expenditure. Tax depreciation is available for capital expenditure incurred on the acquisition of qualifying IP assets. The

deduction is equivalent to the amortisation or depreciation charge on the IP included in the accounts. Alternatively, a company can elect to claim tax deductions over 15 years, at a rate of 7% per annum and 2% in the final year.

The definition of IP assets includes the acquisition of, or the licence to use:

• patents and registered designs

• trademarks and brand names

• know-how

• domain names, copyrights, service marksand publishing titles

• authorisation to sell medicines, a product ofany design, formula, process or invention(and any rights derived from research intosame)

• goodwill, to the extent that it is directlyattributable to qualifying assets

The range of qualifying intangible assets also includes applications for legal protection (for example, applications for the grant or registration of brands, trademarks, patents, copyrights etc).

Tax deductions are available for offset against income generated from exploiting IP assets or as a result of the sale of goods or services, where the use of IP assets contributes to the value of such goods or services.

For all accounting periods beginning before 1 January 2015, the aggregate deduction and related interest expense which could be claimed in a given year could not exceed 80% of the related IP profits of the company as

Business taxation

For more information on R&D tax credits contact:

Stephen Merriman Partner t: 353 1 792 6505 e: [email protected]

Index

Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Business taxation

Index

Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Business taxation

6Tax Facts 2017

capital allowances available to the acquirer are generally limited to the amount unclaimed by the transferor.

Knowledge Development BoxFinance Act 2015 introduced the Knowledge Development Box (KDB), a tax relief that results in an effective 6.25% corporation tax rate to certain profits arising from “qualifying assets”, for accounting periods which commence on or after 1 January 2016. Qualifying profits on which the relief can be claimed are intended to reflect the proportion that the company’s R&D costs bear to its overall expenditure on the qualifying asset. The profits on which relief is available are calculated using the following formula:

Where:

QE is the qualifying expenditure on the qualifying asset

UE is the uplift expenditure

OE is the overall expenditure on the qualifying asset

QA is the profit of the specified trade relating to the qualifying asset

Qualifying assets

Qualifying assets are defined as intellectual property, other than marketing related intellectual property, which are the result of research and development activities.

Intellectual property in this context is defined as:

• Computer Programs (within the meaning of the Copyright and Related Rights Act 2000)

• Qualifying Patents

• Supplementary Protection Certificates

• Plant Breeders Rights

Each qualifying asset is to be treated separately for the purposes of the KDB calculations. However, if a number of qualifying assets are so interlinked that it would be impossible to provide a reasonable allocation of income and expenses, then provision is made for using a “family of assets” and treating the combined assets as one qualifying asset.

Profits of a specified trade

Specified trading activities for the purposes of claiming KDB consist of:

• Managing, developing, maintaining, protecting, enhancing or exploiting of intellectual property,

• Researching, planning, processing, experimenting, testing, devising, developing or other similar activity leading to an invention or creation of intellectual property, or

• The sale of goods or the supply of services that derive part of their value from activities described above.

Qualifying expenditure

The definition of ‘Qualifying expenditure on qualifying assets’ is broadly aligned to the definition of ‘expenditure on research and development’ for the purposes of the R&D tax credit. In this regard, where a company develops, improves or creates a qualifying asset through qualifying R&D activities and the company makes R&D tax credit claims in relation to this, the expenditure underpinning these claims should be broadly aligned to the ‘qualifying expenditure on qualifying assets’ for the purposes of this relief.

Please note that payments made to a third party to carry on R&D activities on behalf of the company are also regarded as qualifying expenditure for the purposes of calculating the relief whereas such payments are restricted for the purposes of the R&D tax credit. Payments made through group companies to third parties in respect of R&D activities are also treated as qualifying expenditure provided no mark-up is taken by the other group company.

Business taxation


computed before such deductions. Finance Act 2014 provides for an increase in this cap from 80% to 100% of those profits with effect for accounting periods beginning on or after 1 January 2015. Any excess deductions can be carried forward and offset against IP profits in succeeding years. This change will enable many companies to claim the allowances and related interest over a shorter period and will also serve to simplify the calculation of allowances.

In addition to the above change, the list of specified intangible assets on which capital allowances may be claimed was extended by Finance Act 2014 to include customer lists acquired otherwise than “directly or indirectly in connection with the transfer of a business as a going concern”.

Finance Act 2014 also provides that no balancing charge will arise where an intangible asset on which allowances have been claimed is sold on or after 23 October 2014 and the sale takes place more than five years after the beginning of the accounting period in which the asset was acquired. In the case of a transfer to a connected company, the capital allowances available to the acquirer are generally limited to the amount unclaimed by the transferor.

Knowledge Development BoxFinance Act 2015 introduced the Knowledge Development Box (KDB), a tax relief that results in an effective 6.25% corporation tax rate to certain profits arising from “qualifying assets”, for accounting periods which

commence on or after 1 January 2016. Qualifying profits on which the relief can be claimed are intended to reflect the proportion that the company’s R&D costs bear to its overall expenditure on the qualifying asset. The profits on which relief is available are calculated using the following formula:

QE + UE x QAOE

Where:

QE is the qualifying expenditure on the qualifying asset

UE is the uplift expenditure

OE is the overall expenditure on the qualifying asset

QA is the profit of the specified trade relating to the qualifying asset

Qualifying assets

Qualifying assets are defined as intellectual property, other than marketing related intellectual property, which are the result of research and development activities. Intellectual property in this context is defined as:

• Computer Programs (within the meaning ofthe Copyright and Related Rights Act 2000)

• Qualifying Patents

• Supplementary Protection Certificates

• Plant Breeders Rights

Each qualifying asset is to be treated separately for the purposes of the KDB calculations. However, if a number of qualifying assets are so interlinked that it would be impossible to provide a reasonable allocation of income and expenses, then provision is made for using a “family of assets” and treating the combined assets as one qualifying asset.

Profits of a specified trade

Specified trading activities for the purposes of claiming KDB consist of:

• Managing, developing, maintaining,protecting, enhancing or exploiting ofintellectual property,

• Researching, planning, processing,experimenting, testing, devising,developing or other similar activity leadingto an invention or creation of intellectualproperty, or

• The sale of goods or the supply of servicesthat derive part of their value from activitiesdescribed above.

Qualifying expenditure

The definition of ‘Qualifying expenditure on qualifying assets’ is broadly aligned to the definition of ‘expenditure on research and development’ for the purposes of the R&D tax credit. In this regard, where a company develops, improves or creates a qualifying asset through qualifying R&D activities and the company makes R&D tax credit claims in relation to this, the expenditure underpinning these claims should be broadly aligned to the


Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Business taxation

Index

Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Business taxation

7Tax Facts 2017

Up-lift expenditure

Costs outsourced to affiliates or costs incurred on the acquisition of the IP are not regarded as qualifying expenditure. However, such costs are allowed as “uplift expenditure” up to a combined maximum of 30% of the total qualifying expenditure.

Overall expenditure

The overall expenditure is the aggregate of the acquisition costs and the group outsourcing costs related to that qualifying asset plus the qualifying expenditure incurred in relation the qualifying asset.

Other points of note

A KDB election must be made in the company’s tax return for the accounting period in which the qualifying expenditure is incurred and must be made within 24 months from the end of that accounting period.

Where a company incurs a loss on the activities that qualify for the KDB relief, the loss should be available on a value basis

against other profits of the company in the relevant year.

There are detailed provisions in relation to how the relevant income and expenditure should be calculated for the purposes of the various definitions detailed above.

Companies must track and trace all expenditure and income relating to the qualifying asset on which a KDB claim is made and should prepare documentation which demonstrates how such expenditure and income are linked to the qualifying asset.

Irish Revenue have published KDB guidelines in August 2016 setting out their interpretation of the KDB legislation.

Tax depreciation Book (or accounting) depreciation is not generally deductible for tax purposes (except in the case of IP assets as above). Instead, tax depreciation (known as capital allowances) is permitted on a straight-line basis in respect of expenditure incurred on assets which have been put into use by the company. The following rates are applicable:

owances are calculated on the cost after deduction of grants, except for plant and machinery used in the course of the manufacture of processed food for human consumption. In this case, the allowances are calculated on the gross cost. Allowances on passenger motor vehicles are restricted to a

capital cost of €24,000 and may be restricted further (to 50% or zero) depending on the level of carbon emissions of the vehicle.

There is a scheme of accelerated allowances that provides for 100% capital allowances in the year of purchase in respect of expenditure incurred by companies on certain qualifying equipm

ent of an energy saving nature acquired for trading purposes. This scheme currently runs until 31 December 2017. In order to qualify under this scheme, the equipment must meet certain energy efficient criteria and must fall within the following classes of technology:

• information and communications technology

• heating and electricity provision

• electric and alternative fuel vehicles

• process and heating, ventilation, and air conditioning (HVAC) control systems

• lighting

• motors and drives

• building energy management systems

• refrigeration and cooling systems

• electro-mechanical systems

• catering and hospitality equipment

A list of the items that qualify under the scheme can be found at www.seai.ie.

Business taxation


‘qualifying expenditure on qualifying assets’ for the purposes of this relief.

Please note that payments made to a third party to carry on R&D activities on behalf of the company are also regarded as qualifying expenditure for the purposes of calculating the relief whereas such payments are restricted for the purposes of the R&D tax credit. Payments made through group companies to third parties in respect of R&D activities are also treated as qualifying expenditure provided no mark-up is taken by the other group company.

Up-lift expenditure

Costs outsourced to affiliates or costs incurred on the acquisition of the IP are not regarded as qualifying expenditure. However, such costs are allowed as “uplift expenditure” up to a combined maximum of 30% of the total qualifying expenditure.

Overall expenditure

The overall expenditure is the aggregate of the acquisition costs and the group outsourcing costs related to that qualifying asset plus the qualifying expenditure incurred in relation the qualifying asset.

Other points of note

A KDB election must be made in the company’s tax return for the accounting period in which the qualifying expenditure is incurred and must be made within 24 months from the end of that accounting period.

Where a company incurs a loss on the activities that qualify for the KDB relief, the loss should be available on a value basis against other profits of the company in the relevant year.

There are detailed provisions in relation to how the relevant income and expenditure should be calculated for the purposes of the various definitions detailed above.

Companies must track and trace all expenditure and income relating to the qualifying asset on which a KDB claim is made and should prepare documentation which demonstrates how such expenditure and income are linked to the qualifying asset.

Irish Revenue have published KDB guidelines in August 2016 setting out their interpretation of the KDB legislation.

Planning tip!

Tax relief is available for companies on the acquisition of qualifying IP assets, including acquisitions from related parties.

Tax depreciation Book (or accounting) depreciation is not generally deductible for tax purposes (except in the case of IP assets as above). Instead, tax depreciation (known as capital allowances) is permitted on a straight-line basis in respect of expenditure incurred on assets which have been put into use by the company. The following rates are applicable:

Asset type Tax depreciation rate

Plant and machinery 12.5%

Industrial buildings used for manufacturing or qualifying activities

4%

Motor vehicles (subject to qualifying cost restrictions below)

12.5%

IP assets Book depreciation or 7%

The allowances are calculated on the cost after deduction of grants, except for plant and machinery used in the course of the manufacture of processed food for human consumption. In this case, the allowances are calculated on the gross cost. Allowances on passenger motor vehicles are restricted to a capital cost of €24,000 and may be restricted further (to 50% or zero) depending on the level of carbon emissions of the vehicle.

There is a scheme of accelerated allowances that provides for 100% capital allowances in the year of purchase in respect of expenditure


Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Business taxation

Index

Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Business taxation

8Tax Facts 2017

LeasingIreland operates an eight-year tax depreciation life on most assets. A beneficial tax treatment applies to finance leases and operating leases of certain short life assets (i.e. those with a life of less than eight years). For such assets, Ireland allows lessors to follow the accounting treatment of the transaction, which provides a faster write-off of the capital cost of an asset rather than relying on tax depreciation over eight years. This effectively allows the lessors to write-off their capital investment for tax purposes in line with the economic recovery on the asset.

Ireland as a holding company locationIrish tax legislation provides for an exemption from capital gains tax for Irish resident companies which make disposals from qualifying shareholdings (at least 5%) in subsidiaries tax resident in an EU or treaty country (including Ireland), where either the subsidiary itself or the group as a whole are regarded as trading.

Under foreign tax credit pooling rules, and subject to limitations placed on credits arising from trading dividends, an excess tax credit arising in respect of a foreign dividend may be offset against the corporation tax arising on other foreign dividend income. Excess tax credits arising in an accounting period may be carried forward indefinitely for offset against corporation tax on foreign dividends in later periods. Any excess foreign tax credits arising in respect of a foreign branch may be offset against Irish tax arising on branch profits in

other countries in the year concerned, and any unused credits may be carried forward indefinitely and credited against corporation tax on foreign branch profits in later accounting periods.

An additional credit for foreign tax is available for dividends paid from 2013 onwards where the existing credit on a dividend from a resident of the EU or an EEA treaty territory is less than the amount that would be computed by reference to the nominal rate of tax in the country from which the dividend was paid. The credit may instead be based on this nominal rate of tax in that EU/EEA treaty territory. It may be the case that the profits out of which the dividend is paid are not themselves subject to tax but are attributable to profits of another company which have been subject to tax (e.g. where a dividend is paid to an intermediate holding company from a company which was subject to tax on the underlying profits and the intermediate holding company is not subject to tax on the dividend under a participation exemption regime). In such circumstances, the additional credit is instead based on the nominal rate of tax in the jurisdiction where the profits were subject to tax.

Foreign dividends paid out of trading profits are subject to corporation tax in Ireland at the 12.5% rate where the paying company is a 75% subsidiary (direct or indirect) of a company whose shares are traded on an approved stock exchange, or where the paying company is tax resident in an EU/ treaty country and the trading profits arose in this company or are sourced through a chain of

EU/treaty resident companies. These provisions are extended to include dividends received from trading companies resident in a territory that has ratified the Convention on Mutual Administrative Assistance in Tax Matters. All other foreign dividends are subject to corporation tax at the 25% rate.

In very limited circumstances, foreign dividends received by an Irish company holding not more than 5% of the share capital and voting rights in the foreign company are exempt from corporation tax. This exemption only applies where the dividend income is taxed as trading income of the Irish company.

Irish tax legislation has no thin capitalisation or controlled foreign corporation (CFC) rules.

A form of pooling of tax deductions (not credits) for foreign tax on royalties is available where such royalties are treated as trading income for companies. All royalties sourced from non-treaty countries from which foreign tax has been deducted are aggregated and the foreign tax applicable is used to reduce the amount of such royalties subject to Irish tax.

Business taxation


incurred by companies on certain qualifying equipment of an energy saving nature acquired for trading purposes. This scheme currently runs until 31 December 2017. In order to qualify under this scheme, the equipment must meet certain energy efficient criteria and must fall within the following classes of technology:

• information and communicationstechnology

• heating and electricity provision

• electric and alternative fuel vehicles

• process and heating, ventilation, and airconditioning (HVAC) control systems

• lighting

• motors and drives

• building energy management systems

• refrigeration and cooling systems

• electro-mechanical systems

• catering and hospitality equipment

A list of the items that qualify under the scheme can be found at www.seai.ie.

LeasingIreland operates an eight-year tax depreciation life on most assets. A beneficial tax treatment applies to finance leases and operating leases of certain short life assets (i.e. those with a life of less than eight years). For such assets, Ireland allows lessors to follow the accounting treatment of the transaction, which provides a faster write-off

of the capital cost of an asset rather than relying on tax depreciation over eight years. This effectively allows the lessors to write-off their capital investment for tax purposes in line with the economic recovery on the asset.

Ireland as a holding company locationIrish tax legislation provides for an exemption from capital gains tax for Irish resident companies which make disposals from qualifying shareholdings (at least 5%) in subsidiaries tax resident in an EU or treaty country (including Ireland), where either the subsidiary itself or the group as a whole are regarded as trading.

Under foreign tax credit pooling rules, and subject to limitations placed on credits arising from trading dividends, an excess tax credit arising in respect of a foreign dividend may be offset against the corporation tax arising on other foreign dividend income. Excess tax credits arising in an accounting period may be carried forward indefinitely for offset against corporation tax on foreign dividends in later periods. Any excess foreign tax credits arising in respect of a foreign branch may be offset against Irish tax arising on branch profits in other countries in the year concerned, and any unused credits may be carried forward indefinitely and credited against corporation tax on foreign branch profits in later accounting periods.

An additional credit for foreign tax is available for dividends paid from 2013 onwards where the existing credit on a dividend from a

resident of the EU or an EEA treaty territory is less than the amount that would be computed by reference to the nominal rate of tax in the country from which the dividend was paid. The credit may instead be based on this nominal rate of tax in that EU/EEA treaty territory. It may be the case that the profits out of which the dividend is paid are not themselves subject to tax but are attributable to profits of another company which have been subject to tax (e.g. where a dividend is paid to an intermediate holding company from a company which was subject to tax on the underlying profits and the intermediate holding company is not subject to tax on the dividend under a participation exemption regime). In such circumstances, the additional credit is instead based on the nominal rate of tax in the jurisdiction where the profits were subject to tax.

Foreign dividends paid out of trading profits are subject to corporation tax in Ireland at the 12.5% rate where the paying company is a 75% subsidiary (direct or indirect) of a company whose shares are traded on an approved stock exchange, or where the paying company is tax resident in an EU/ treaty country and the trading profits arose in this company or are sourced through a chain of EU/treaty resident companies. These provisions are extended to include dividends received from trading companies resident in a territory that has ratified the Convention on Mutual Administrative Assistance in Tax Matters. All other foreign dividends are subject to corporation tax at the 25% rate.


Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Business taxation

Index

Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Business taxation

9Tax Facts 2017

Closely held companiesBroadly speaking, a close company is a company which is under the control of five or fewer ‘participators’ (which include shareholders and loan creditors) or under the control of ‘participators’ who are directors (however many directors there are). There are a number of exclusions from this general rule. These include exclusions for non-resident companies, specified industrial and provident societies / building societies, companies controlled by the State / by another EU Member State or by the Government of a treaty territory, certain companies with quoted shares and companies which are controlled by a non-close company.

A surcharge of 20% is payable on the total undistributed investment and rental income of a close company. Closely held “service” companies are also liable to a surcharge of 15% on one-half of their undistributed trading income.

Other specific provisions applying to closely held companies include:

• certain payments made on behalf of ‘participators’ in the company or their associates may be deemed to be distributions of the company

• interest paid to certain directors or their associates (e.g. on foot of a loan advanced) may be deemed to be a distribution where the interest exceeds specified limits

• a company making loans to ‘participators’ or their associates may be required, subject to certain exclusions, to pay income tax to

Irish Revenue on the ‘grossed up’ amount of the loan

Start-up companiesNew or start-up companies, which commence trading between 2009 and 2018 may be eligible for start-up companies’ relief. This relief is available for three years from the commencement of the trade. The relief takes the form of a reduction in the corporation tax liability relating to the new trade (including chargeable gains on assets used in the trade) and is capped at the amount of the employer’s social insurance contributions made on behalf of the company’s employees in the period. The corporation tax liability relating to the new trade can reduce to nil where that liability does not exceed €40,000. Where the company’s corporation tax liability is between €40,000 and €60,000, marginal relief is available. For accounting periods ending on or after 1 January 2013, any unused relief arising in the first three years of trading can be carried forward for use in subsequent years.

Corporate – Tax administration

Taxable period

The tax accounting period normally coincides with a company’s financial accounting period, except where the latter period exceeds 12 months.

Tax return

A company must submit its corporation tax return within nine months of the end of the accounting period to which the return relates

(but no later than 21st day of the month) in order to avoid the imposition of (i) a surcharge of up to 10% of the tax due (subject to a maximum surcharge of €63,485), (ii) a restriction of up to 50% of certain claims for relief including relief for trading losses arising in the same period (subject to a maximum restriction of €158,715).

Irish Revenue introduced mandatory filing of financial statements in iXBRL format in 2012 on a phased basis. The provisions applied initially to companies which are dealt with by the Revenue Large Cases Division. The second phase made filing mandatory for all taxpayers filing corporation tax returns on or after 1 October 2014 in respect of accounting periods ending on or after 31 December 2013 unless the taxpayer met specific iXBRL exemption criteria. It is intended that all remaining corporation taxpayers will be included in the final phase which will commence at a date to be announced by Irish Revenue.

Business taxation


In very limited circumstances, foreign dividends received by an Irish company holding not more than 5% of the share capital and voting rights in the foreign company are exempt from corporation tax. This exemption only applies where the dividend income is taxed as trading income of the Irish company.

Irish tax legislation has no thin capitalisation or controlled foreign corporation (CFC) rules.

A form of pooling of tax deductions (not credits) for foreign tax on royalties is available where such royalties are treated as trading income for companies. All royalties sourced from non-treaty countries from which foreign tax has been deducted are aggregated and the foreign tax applicable is used to reduce the amount of such royalties subject to Irish tax.

Closely held companiesBroadly speaking, a close company is a company which is under the control of five or fewer ‘participators’ (which include shareholders and loan creditors) or under the control of ‘participators’ who are directors (however many directors there are). There are a number of exclusions from this general rule. These include exclusions for non-resident companies, specified industrial and provident societies / building societies, companies controlled by the State / by another EU Member State or by the Government of a treaty territory, certain companies with quoted shares and companies which are controlled by a non-close company.

A surcharge of 20% is payable on the total undistributed investment and rental income of a close company. Closely held “service” companies are also liable to a surcharge of 15% on one-half of their undistributed trading income.

Other specific provisions applying to closely held companies include:

• certain payments made on behalf of‘participators’ in the company or theirassociates may be deemed to bedistributions of the company

• interest paid to certain directors or theirassociates (e.g. on foot of a loan advanced)may be deemed to be a distribution wherethe interest exceeds specified limits

• a company making loans to ‘participators’ ortheir associates may be required, subject tocertain exclusions, to pay income tax to

Irish Revenue on the ‘grossed up’ amount of the loan

Start-up companiesNew or start-up companies, which commence trading between 2009 and 2018 may be eligible for start-up companies’ relief. This relief is available for three years from the commencement of the trade. The relief takes the form of a reduction in the corporation tax liability relating to the new trade (including chargeable gains on assets used in the trade) and is capped at the amount of the employer’s social insurance contributions made on behalf of the company’s employees in the period. The corporation tax liability relating to the new trade can reduce to nil where that liability does not exceed €40,000. Where the company’s corporation tax liability is between €40,000 and €60,000, marginal relief is available. For accounting periods ending on or after 1 January 2013, any unused relief arising in the first three years of trading can be carried forward for use in subsequent years.

Corporate – Tax administration

Taxable period

The tax accounting period normally coincides with a company’s financial accounting period, except where the latter period exceeds 12 months.

Tax return

A company must submit its corporation tax return within nine months of the end of the accounting period to which the return relates

Business taxation

Contact us:

Ronan MacNioclais Partner t: 353 1 792 6006 e: [email protected]

Index

Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Business taxation

Index

Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Business taxation

10Tax Facts 2017

Payment of tax

Corporation tax payment dates are different for ‘large’ and ‘small’ companies.

A ‘small’ company is a company whose corporation tax liability in the preceding year was less than €200,000 (the ‘relevant limit’). This limit is adjusted pro-rata where the preceding corporation tax period was less than one year in length.

All other companies are ‘large’ companies.

Large companies

The first instalment of preliminary tax is due six months from the start of the tax accounting period (but no later than the 21st day of that month). To avoid the imposition of interest charges for late payment of tax, the payment made must equal at least (i) 45% of the final corporation tax liability for the

period, or (ii) 50% of the corporation tax liability for its immediately preceding period (adjusted pro-rata where the lengths of the respective periods differ).

The second instalment of preliminary tax is due 31 days before the end of the tax accounting period (but no later than the 21st day of that month). This payment must bring the total paid up to 90% of the final corporation tax liability for the period.

The balance of tax is due when the corporation tax return for the period is filed (that is, within nine months of the end of the tax accounting period, but no later than the 21st day of the month in which that period of nine months ends).

Small companies

Small companies are required to pay preliminary corporation tax in one instalment only. This is due 31 days before the end of the tax accounting period (but no later than the 21st day of the month).

To avoid the imposition of interest charges for late payment of tax, the payment must equal at least (i) 90% of the final corporation tax liability for the period or (ii) 100% of the corporation tax liability for its immediately preceding period (again adjusted pro-rata where the lengths of the respective periods differ). The balance of tax is due when the corporation tax return is filed.

A special provision exists for start-up companies. In the accounting period in which a company comes within the charge to Irish

corporation tax, if its corporation tax liability for that period is less than the ‘relevant limit’ set out above, its preliminary corporation tax for the period is taken as Nil.

Electronic Filing

Where returns and payments are made electronically via the Irish Revenue’s Online system (ROS), the above filing and payment deadlines are extended to the 23rd day of the relevant month. In general, companies have been required to pay and file electronically since 2011.

Statute of limitations

A system of self-assessment and Irish Revenue audits is in operation in Ireland. Irish Revenue may undertake an audit of a company’s tax return within a period of four years from the end of the accounting period in which the return is submitted.

Business taxation


(but no later than 21st day of the month) in order to avoid the imposition of (i) a surcharge of up to 10% of the tax due (subject to a maximum surcharge of €63,485), (ii) a restriction of up to 50% of certain claims for relief including relief for trading losses arising in the same period (subject to a maximum restriction of €158,715).

Irish Revenue introduced mandatory filing of financial statements in iXBRL format in 2012 on a phased basis. The provisions applied initially to companies which are dealt with by the Revenue Large Cases Division. The second phase made filing mandatory for all taxpayers filing corporation tax returns on or after 1 October 2014 in respect of accounting periods ending on or after 31 December 2013 unless the taxpayer met specific iXBRL exemption criteria. It is intended that all remaining corporation taxpayers will be included in the final phase which will commence at a date to be announced by Irish Revenue.

Payment of tax

Corporation tax payment dates are different for ‘large’ and ‘small’ companies.

A ‘small’ company is a company whose corporation tax liability in the preceding year was less than €200,000 (the ‘relevant limit’). This limit is adjusted pro-rata where the preceding corporation tax period was less than one year in length.

All other companies are ‘large’ companies.

Large companies

The first instalment of preliminary tax is due six months from the start of the tax accounting period (but no later than the 21st day of that month). To avoid the imposition of interest charges for late payment of tax, the payment made must equal at least (i) 45% of the final corporation tax liability for the period, or (ii) 50% of the corporation tax liability for its immediately preceding period (adjusted pro-rata where the lengths of the respective periods differ).

The second instalment of preliminary tax is due 31 days before the end of the tax accounting period (but no later than the 21st day of that month). This payment must bring the total paid up to 90% of the final corporation tax liability for the period.

The balance of tax is due when the corporation tax return for the period is filed (that is, within nine months of the end of the tax accounting period, but no later than the 21st day of the month in which that period of nine months ends).

Small companies

Small companies are required to pay preliminary corporation tax in one instalment only. This is due 31 days before the end of the tax accounting period (but no later than the 21st day of the month).

To avoid the imposition of interest charges for late payment of tax, the payment must equal at least (i) 90% of the final corporation tax liability for the period or (ii) 100% of the

corporation tax liability for its immediately preceding period (again adjusted pro-rata where the lengths of the respective periods differ). The balance of tax is due when the corporation tax return is filed.

A special provision exists for start-up companies. In the accounting period in which a company comes within the charge to Irish corporation tax, if its corporation tax liability for that period is less than the ‘relevant limit’ set out above, its preliminary corporation tax for the period is taken as Nil.

Electronic Filing

Where returns and payments are made electronically via the Irish Revenue’s Online system (ROS), the above filing and payment deadlines are extended to the 23rd day of the relevant month. In general, companies have been required to pay and file electronically since 2011.

Statute of limitations

A system of self-assessment and Irish Revenue audits is in operation in Ireland. Irish Revenue may undertake an audit of a company’s tax return within a period of four years from the end of the accounting period in which the return is submitted.


Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Business taxation

Index

Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Business taxation

11Tax Facts 2017

Business taxation


Business taxation

Contact us:

John O’Leary Partner Financial Services & International Structuring t: 353 1 792 8659 e: [email protected]

Jean Delaney Partner Inward Investment & International Structuring t: 353 1 792 6280 e: [email protected]

Paraic Burke Partner Domestic & International Structuring t: 353 1 792 8655 e: [email protected]

Index

Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Business taxation

Index

Welcome

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Business taxation

12Tax Facts 2017

OverviewIreland’s transfer pricing legislation effectively endorses the OECD Transfer Pricing Guidelines and the arm’s length principle. The transfer pricing rules apply to arrangements entered into between associated persons, involving the supply or acquisition of goods, services, money or intangible assets. The rules apply only to trading transactions that are taxed under Case I or II of Schedule D of the Taxes Acts (in the main transactions taxable at 12.5%).

The rules confer a power on Irish Revenue to re-compute the taxable profit or loss of a taxpayer where income has been understated or where expenditure has been overstated as a result of non-arm’s length transfer pricing practices.

Ireland’s transfer pricing rules came into effect for accounting periods commencing on or after 1 January 2011 in relation to arrangements entered into on or after 1 July 2010.

Other highlights of the transfer pricing legislation are as follows:

• the regime applies to domestic and international related party arrangements

• specific guidance issued by Irish Revenue states that in order “for a company to be in a position to make a correct and complete tax return”, appropriate transfer pricing documentation should exist at the time the tax return is filed

• there is an exemption for small and medium enterprises (SMEs)

Transfer Pricing Compliance ReviewIn 2015, a dedicated transfer pricing audit team was formed within the Large Cases Division of Irish Revenue to monitor compliance with Irish transfer pricing rules. Specific transfer pricing audit enquiries and investigations are now being initiated by the Large Cases Division.

Irish Revenue also continues to monitor compliance with the transfer pricing rules through its Transfer Pricing Compliance Review (TPCR) programme. Under this programme, companies selected will be notified to undergo a self-review of their compliance with the Irish transfer pricing rules.

Companies selected will be requested to provide a transfer pricing report, for a specific accounting period, to Irish Revenue within three months. In order to minimise compliance costs, Irish Revenue has explicitly stated that existing studies elsewhere in the multinational group which cover the related party dealings of the Irish operations should be sufficient.

The TPCR programme is not a formal audit so this allows for voluntary disclosures to be made at any time during the process. The outcome of a TPCR will be a letter from Irish Revenue indicating either:

1. no further enquiries or

2. issues that need to be further addressed within the TPCR process.

Irish Revenue reserves the right to escalate a case to a formal audit, for example in cases where a company declines to complete a self-review. Should a case escalate from a TPCR to an audit, the company will be issued with a separate audit notification letter.

Country-by-Country ReportingFinance Act 2015 included legislation introducing country-by-country (CbC) reporting for Irish-parented multinational enterprises (Irish MNEs). The legislation requires Irish MNEs with consolidated annualised group revenue of €750 million or more to comply with the new requirements, with the first CbC report to be prepared for fiscal years beginning on or after 1 January 2016. Irish MNEs captured under the new legislation must file a CbC report annually to include specific financial data covering income, taxes, and other key measures of economic activity by territory.

Irish Revenue have also published regulations to provide for a secondary filing mechanism whereby, in certain circumstances, an Irish tax resident entity that is part of a foreign MNE with consolidated annualised group revenue of €750 million or more shall be required to submit an ‘equivalent CbC report’ to Irish Revenue.

Transfer Pricing


OverviewIreland’s transfer pricing legislation effectively endorses the OECD Transfer Pricing Guidelines and the arm’s length principle. The transfer pricing rules apply to arrangements entered into between associated persons, involving the supply or acquisition of goods, services, money or intangible assets. The rules apply only to trading transactions that are taxed under Case I or II of Schedule D of the Taxes Acts (in the main transactions taxable at 12.5%).

The rules confer a power on Irish Revenue to re-compute the taxable profit or loss of a taxpayer where income has been understated or where expenditure has been overstated as a result of non-arm’s length transfer pricing practices.

Ireland’s transfer pricing rules came into effect for accounting periods commencing on or after 1 January 2011 in relation to arrangements entered into on or after 1 July 2010.

Other highlights of the transfer pricing legislation are as follows:

• the regime applies to domestic andinternational related party arrangements

• specific guidance issued by Irish Revenuestates that in order “for a company to be in aposition to make a correct and complete taxreturn”, appropriate transfer pricingdocumentation should exist at the time thetax return is filed

• there is an exemption for small and mediumenterprises (SMEs)

Transfer Pricing Compliance ReviewIn 2015, a dedicated transfer pricing audit team was formed within the Large Cases Division of Irish Revenue to monitor compliance with Irish transfer pricing rules. Specific transfer pricing audit enquiries and investigations are now being initiated by the Large Cases Division.

Irish Revenue also continues to monitor compliance with the transfer pricing rules through its Transfer Pricing Compliance Review (TPCR) programme. Under this programme, companies selected will be notified to undergo a self-review of their compliance with the Irish transfer pricing rules.

Companies selected will be requested to provide a transfer pricing report, for a specific accounting period, to Irish Revenue within three months. In order to minimise compliance costs, Irish Revenue has explicitly stated that existing studies elsewhere in the multinational group which cover the related party dealings of the Irish operations should be sufficient.

The TPCR programme is not a formal audit so this allows for voluntary disclosures to be made at any time during the process. The outcome of a TPCR will be a letter from Irish Revenue indicating either:

1. no further enquiries or

2. issues that need to be further addressedwithin the TPCR process.

Irish Revenue reserves the right to escalate a case to a formal audit, for example in cases where a company declines to complete a self-review. Should a case escalate from a TPCR to an audit, the company will be issued with a separate audit notification letter.

Country-by-Country ReportingFinance Act 2015 included legislation introducing country-by-country (CbC) reporting for Irish-parented multinational enterprises (Irish MNEs). The legislation requires Irish MNEs with consolidated annualised group revenue of €750 million or more to comply with the new requirements, with the first CbC report to be prepared for fiscal years beginning on or after 1 January 2016. Irish MNEs captured under the new legislation must file a CbC report annually to include specific financial data covering income, taxes, and other key measures of economic activity by territory.

Irish Revenue have also published regulations to provide for a secondary filing mechanism whereby, in certain circumstances, an Irish tax resident entity that is part of a foreign MNE with consolidated annualised group revenue of €750 million or more shall be required to submit an ‘equivalent CbC report’ to Irish Revenue.

Transfer Pricing

Transfer Pricing

Index

Welcome

Business taxation

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Transfer Pricing

Index

Welcome

Business taxation

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

13Tax Facts 2017

Transfer Pricing

Irish MNEs or Irish subsidiaries of foreign MNEs which are subject to CbC reporting are required to notify Irish Revenue of their filing requirements. The deadline for notification is the last day of the fiscal year to which the CbC report relates and must be submitted electronically via Irish Revenue’s Online Service.

Advance Pricing AgreementsIrish Revenue have introduced a formal bilateral Advance Pricing Agreement (APA) Programme effective from 1 July 2016.

Ireland’s bilateral APA programme applies to bilateral APA applications made to Revenue on or after this date and only applies to transfer pricing issues (including the attribution of profits to a permanent establishment).

An application for a bilateral APA may be made by a company which is tax-resident in Ireland for the purpose of the relevant double tax treaty and also by a permanent establishment in Ireland of a non-resident company in accordance with the provisions of the relevant treaty.

The bilateral APA programme is intended to apply in respect of a transaction(s) where the transfer pricing issues involved are complex, e.g. there is significant doubt over the appropriate application of the arm’s length principle, or where, for any other reason, there would otherwise be a high likelihood of double taxation arising (in the absence of a bilateral APA).

Ireland’s bilateral APA programme is conducted within the legal framework of the double tax treaty which Ireland has entered into with the other jurisdiction concerned.


For more information on transfer pricing contact:

Gavan Ryle Partner Irish Headquartered Groups t: 353 1 792 8704 e: [email protected]

Aoife Harrison Financial Services t: 353 1 792 5537 e: [email protected]

Ronan Finn Partner Foreign Direct Investment t: 353 1 792 6105 e: [email protected]

Transfer Pricing

Irish MNEs or Irish subsidiaries of foreign MNEs which are subject to CbC reporting are required to notify Irish Revenue of their filing requirements. The deadline for notification is the last day of the fiscal year to which the CbC report relates and must be submitted electronically via Irish Revenue’s Online Service.

Advance Pricing AgreementsIrish Revenue have introduced a formal bilateral Advance Pricing Agreement (APA) Programme effective from 1 July 2016.

Ireland’s bilateral APA programme applies to bilateral APA applications made to Revenue on or after this date and only applies to transfer pricing issues (including the attribution of profits to a permanent establishment).

An application for a bilateral APA may be made by a company which is tax-resident in Ireland for the purpose of the relevant double tax treaty and also by a permanent establishment in Ireland of a non-resident company in accordance with the provisions of the relevant treaty.

The bilateral APA programme is intended to apply in respect of a transaction(s) where the transfer pricing issues involved are complex, e.g. there is significant doubt over the appropriate application of the arm’s length principle, or where, for any other reason, there would otherwise be a high likelihood of double taxation arising (in the absence of a bilateral APA).

Ireland’s bilateral APA programme is conducted within the legal framework of the double tax treaty which Ireland has entered into with the other jurisdiction concerned.

Index

Welcome

Business taxation

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Transfer Pricing

Index

Welcome

Business taxation

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Transfer Pricing

14Tax Facts 2017

Banking and treasuryThe international banking sector has developed into a vital component of the Irish economy, with approximately half of the top 50 world banks located in Ireland. In addition, a large number of multinationals have established corporate treasury operations in Ireland to manage inter alia, inter-group lending, cash pooling, cash management, debt factoring, multicurrency management and hedging activities on behalf of their respective groups.

Irish resident companies are subject to 12.5% corporation tax on their tax adjusted trading profits. A higher tax rate of 25% applies to “passive” income. These comparatively low tax rates have been supported by an enviable tax framework, as detailed below, in contributing to Ireland’s success in attracting investment from international banks, various financial institutions and treasury companies:

• Absence of CFC and thin capitalisation rules

• Tax deductions are generally available for funding costs

• Extensive domestic exemptions from withholding tax on interest, dividend and royalty payments

• Generous double taxation relief provisions for foreign taxes and withholding taxes suffered

• Access to Ireland’s extensive double tax treaty network with 72 treaties signed of which 70 are in effect

• No capital duty or net assets wealth tax

• Favourable and improving income tax rules for non-Irish domiciled individuals working in Ireland

• Stamp duty exemptions available on the majority of financial instruments

• Tax credit for research and development activities

• Deduction for certain interest/dividend payments made in respect of capital instruments issued by banks in order to satisfy their Tier 1 capital requirements

A bank levy applies to banks and building societies and is calculated as 59% of the amount of DIRT (Deposit Interest Retention Tax) paid by the bank or building society from 2017 onwards. The levy is payable on 20 October annually. The annual levy was due to expire at the end of 2016 but will now run until 2021. The base year for calculating the levy due in 2017 and 2018 will be 2015, with 2017 being the base year for the levies due in 2019 and 2020. The base year for the tax due in 2021 will be 2019.

Insurance Ireland is a key player in the global insurance and reinsurance industry. The key factors behind this success include the fiscal environment, the European standard regulatory regime (in particular the passporting regime), a relatively low cost base and a strong business infrastructure relating to international insurance and reinsurance.

Insurance and reinsurance companies that are tax resident in Ireland are subject to Irish

corporation tax at the rate of 12.5% on their tax adjusted trading profits and enjoy the same attractive tax framework outlined above for the banking and treasury sector. In addition, there are a number of tax features specific to the Irish insurance sector as follows:

• a gross roll up regime for life funds whereby investment returns for non-Irish resident policyholders accrue on a tax-free basis,

• exemption from US Federal Excise Tax (FET) under the US/Ireland double tax treaty in respect of the insurance/reinsurance of US risks, and

• no Insurance Premium Tax (IPT) on insurance premiums received in Ireland in respect of risk located outside of Ireland and no IPT on reinsurance irrespective of where the risk is located.

A number of leading insurers and reinsurers have established significant hub operations in Ireland. The “hub and spoke” model, whereby pan-European insurance and reinsurance operations centralise their organisational structure in a single head office located within the EU, creates significant capital and operational efficiencies. Ireland is a leading location for such hubs and two of the main factors behind this are:

• Ireland’s 12.5% corporation tax rate on the Irish head office profits, and

• Ireland’s genrous double taxation relief regime that provides credit for foriegn tax paid on foreign branch profits against the Irish tax on these profits. This achieves an

Financial services


Banking and treasuryThe international banking sector has developed into a vital component of the Irish economy, with approximately half of the top 50 world banks located in Ireland. In addition, a large number of multinationals have established corporate treasury operations in Ireland to manage inter alia, inter-group lending, cash pooling, cash management, debt factoring, multicurrency management and hedging activities on behalf of their respective groups.

Irish resident companies are subject to 12.5% corporation tax on their tax adjusted trading profits. A higher tax rate of 25% applies to “passive” income. These comparatively low tax rates have been supported by an enviable tax framework, as detailed below, in contributing to Ireland’s success in attracting investment from international banks, various financial institutions and treasury companies:

• Absence of CFC and thin capitalisation rules

• Tax deductions are generally available forfunding costs

• Extensive domestic exemptions fromwithholding tax on interest, dividend androyalty payments

• Generous double taxation relief provisionsfor foreign taxes and withholding taxessuffered

• Access to Ireland’s extensive double taxtreaty network with 72 treaties signed ofwhich 70 are in effect

• No capital duty or net assets wealth tax

• Favourable and improving income tax rulesfor non-Irish domiciled individuals workingin Ireland

• Stamp duty exemptions available on themajority of financial instruments

• Tax credit for research and developmentactivities

• Deduction for certain interest/dividendpayments made in respect of capitalinstruments issued by banks in order tosatisfy their Tier 1 capital requirements

A bank levy applies to banks and building societies and is calculated as 59% of the amount of DIRT (Deposit Interest Retention Tax) paid by the bank or building society from 2017 onwards. The levy is payable on 20 October annually. The annual levy was due to expire at the end of 2016 but will now run until 2021. The base year for calculating the levy due in 2017 and 2018 will be 2015, with 2017 being the base year for the levies due in 2019 and 2020. The base year for the tax due in 2021 will be 2019.

Insurance Ireland is a key player in the global insurance and reinsurance industry. The key factors behind this success include the fiscal environment, the European standard regulatory regime (in particular the passporting regime), a relatively low cost base and a strong business infrastructure relating to international insurance and reinsurance.

Insurance and reinsurance companies that are tax resident in Ireland are subject to Irish

corporation tax at the rate of 12.5% on their tax adjusted trading profits and enjoy the same attractive tax framework outlined above for the banking and treasury sector. In addition, there are a number of tax features specific to the Irish insurance sector as follows:

• a gross roll up regime for life funds wherebyinvestment returns for non-Irish residentpolicyholders accrue on a tax-free basis,

• exemption from US Federal Excise Tax(FET) under the US/Ireland double taxtreaty in respect of the insurance/reinsurance of US risks, and

• no Insurance Premium Tax (IPT) oninsurance premiums received in Ireland inrespect of risk located outside of Ireland andno IPT on reinsurance irrespective of wherethe risk is located.

A number of leading insurers and reinsurers have established significant hub operations in Ireland. The “hub and spoke” model, whereby pan-European insurance and reinsurance operations centralise their organisational structure in a single head office located within the EU, creates significant capital and operational efficiencies. Ireland is a leading location for such hubs and two of the main factors behind this are:

Financial services

• Ireland's 12.5% corporation tax rate on the Irish head office profits, and

• Ireland's generous double taxation relief regime that provides credit for foreign tax paid on foreign branch profits against the

Financial Services

Index

Welcome

Business taxation

Transfer Pricing


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Financial Services

Index

Welcome

Business taxation

Transfer Pricing


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

15Tax Facts 2017

effective exemption for foreign branch profits given that the Irish corporation tax rate is genrally lower than corporation tax rates in other countries.

Ireland is a leading European domicile for reinsurers seeking to redomicile from centres such as Bermuda and Ireland continues to be one of the largest exporters of life insurance in the EU.

Exit tax

A withholding tax, known as exit tax, is required to be operated in respect of Irish life policies on payments to taxable Irish individual policyholders on certain chargeable events at the rate of 41% and at 25% on payments to corporate policyholders. The holding of policies at the end of an eight year period (and each subsequent eight year anniversary) will constitute a deemed disposal on which exit tax may arise in respect of taxable Irish policyholders. Non-Irish resident and exempt Irish resident policyholders are not subject to exit tax on Irish life policies provided relevant declarations are in place.

Aircraft leasingIreland was the birthplace of the aircraft leasing industry over 35 years ago. Since then, Ireland has pioneered the development of an envious and supportive tax and legal environment to incentivise the continued growth of the industry.

A tax depreciation write-off period of eight years is available for aircraft and engines and

means significant acceleration for such long-life assets. Ireland has an extensive (and ever increasing) high quality double tax treaty network, with the majority of these treaties providing for 0% withholding tax on inbound lease rentals. In addition, there are no withholding taxes on outbound lease rentals. Since 2011, Ireland’s Section 110 companies (see ‘Section 110 companies’ below) can hold leased aircraft or engines as qualifying assets, providing potentially tax neutral aircraft leasing opportunities. There is 0% stamp duty on instruments transferring aircraft or any interest, share or property of or in an aircraft and there is 0% VAT on international aircraft leasing. In addition, there is a stamp duty exemption on the issue, transfer or redemption of an Enhanced Equipment Trust Certificate (“EETC”) as an aviation financing tool in Ireland.

Unilateral credit relief was introduced in 2012 where withholding taxes are suffered on lease rental payments from countries with which Ireland does not have a tax treaty. This relief was further amended in 2013 to provide for the carry forward of excess foreign tax credits arising on lease rental income received by an Irish trading entity that would otherwise be lost.

The introduction and amendments over recent years to the Special Assignment Relief Programme incentivises executives to relocate to Ireland and the Foreign Earnings Deduction regime, which provides tax relief to Irish employees who spend time working overseas, helps to promote the growth of the aircraft leasing sector in Ireland.

Aviation Sector Capital allowances for aviation servicesFinance Act 2015 introduces enhanced capital allowances for capital expenditure incurred on buildings employed in a trade of maintenance, repair or overhaul of commercial aircraft or a commercial aircraft dismantling trade. The scheme provides for tax depreciation over a seven year period instead of the normal 25 year period but is limited to the first €5 million of expenditure on relevant buildings (where incurred by a company) and €1.25 million (where incurred by an individual). Expenditure in excess of these limits may still qualify for the normal industrial buildings allowances regime. The scheme, providing for accelerated allowances over seven years, will operate in respect of relevant expenditure incurred up to 13 October 2020. The scheme further enhances Ireland’s offering in the aviation sector.

Section 110 companiesIreland has a favourable securitisation tax regime for entities known as Section 110 companies. A Section 110 company is an Irish resident special purpose company that holds and/or manages ‘qualifying assets’, which includes ‘financial assets’. The term ‘financial asset’ is widely defined and includes both mainstream financial assets such as shares, loans, leases, lease portfolios, bonds, debt, derivatives, all types of receivables as well as assets such as carbon offsets and plant and machinery.

It is possible to establish a Section 110 Company as an onshore investment platform

Financial services


means significant acceleration for such long-life assets. Ireland has an extensive (and ever increasing) high quality double tax treaty network, with the majority of these treaties providing for 0% withholding tax on inbound lease rentals. In addition, there are no withholding taxes on outbound lease rentals. Since 2011, Ireland’s Section 110 companies (see ‘Section 110 companies’ below) can hold leased aircraft or engines as qualifying assets, providing potentially tax neutral aircraft leasing opportunities. There is 0% stamp duty on instruments transferring aircraft or any interest, share or property of or in an aircraft and there is 0% VAT on international aircraft leasing. In addition, there is a stamp duty exemption on the issue, transfer or redemption of an Enhanced Equipment Trust Certificate (“EETC”) as an aviation financing tool in Ireland.

Unilateral credit relief was introduced in 2012 where withholding taxes are suffered on lease rental payments from countries with which Ireland does not have a tax treaty. This relief was further amended in 2013 to provide for the carry forward of excess foreign tax credits arising on lease rental income received by an Irish trading entity that would otherwise be lost.

The introduction and amendments over recent years to the Special Assignment Relief Programme incentivises executives to relocate to Ireland and the Foreign Earnings Deduction regime, which provides tax relief to Irish employees who spend time working overseas, helps to promote the growth of the aircraft leasing sector in Ireland.

Aviation Sector Capital allowances for aviation servicesFinance Act 2015 introduced enhanced capital allowances for capital expenditure incurred on buildings employed in a trade of maintenance, repair or overhaul of commercial aircraft or a commercial aircraft dismantling trade. The scheme provides for tax depreciation over a seven year period instead of the normal 25 year period but is limited to the first €5 million of expenditure on relevant buildings (where incurred by a company) and €1.25 million (where incurred by an individual). Expenditure in excess of these limits may still qualify for the normal industrial buildings allowances regime. The scheme, providing for accelerated allowances over seven years, will operate in respect of relevant expenditure incurred up to 13 October 2020. The scheme further enhances Ireland’s offering in the aviation sector.

Section 110 companiesIreland has a favourable securitisation tax regime for entities known as Section 110 companies. A Section 110 company is an Irish resident special purpose company that holds and/or manages ‘qualifying assets’, which includes ‘financial assets’. The term ‘financial asset’ is widely defined and includes both mainstream financial assets such as shares, loans, leases, lease portfolios, bonds, debt, derivatives, all types of receivables as well as assets such as carbon offsets and plant and machinery.

It is possible to establish a Section 110 Company as an onshore investment platform

Financial services

Ireland is a leading European domicile for reinsurers seeking to redomicile from centres such as Bermuda and Ireland continues to be one of the largest exporters of life insurance in the EU.

Exit tax

A withholding tax, known as exit tax, is required to be operated in respect of Irish life policies on payments to taxable Irish individual policyholders on certain chargeable events at the rate of 41% and at 25% on payments to corporate policyholders. The holding of policies at the end of an eight year period (and each subsequent eight year anniversary) will constitute a deemed disposal on which exit tax may arise in respect of taxable Irish policyholders. Non-Irish resident and exempt Irish resident policyholders are not subject to exit tax on Irish life policies provided relevant declarations are in place.

Aircraft leasingIreland was the birthplace of the aircraft leasing industry over 35 years ago. Since then, Ireland has pioneered the development of an envious and supportive tax and legal environment to incentivise the continued growth of the industry.

A tax depreciation write-off period of eight years is available for aircraft and engines and

Irish tax on those profits. This achieves an effective exemption for foreign branch profits given that the Irish corporation tax rate is generally lower than corporation tax rates in other countries.

Index

Welcome

Business taxation

Transfer Pricing


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Financial Services

Index

Welcome

Business taxation

Transfer Pricing


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Financial Services

16Tax Facts 2017

to access Ireland’s double tax treaty network. The Section 110 regime has been in existence since the early 1990s and with appropriate planning effectively allows for corporation tax neutral treatment, provided that certain conditions are met. The regime is used by international banks, asset managers, and investment funds to facilitate securitisations, investment platforms, collateralised debt obligations (CDOs), collateralised loan obligations (CLOs) and capital markets bond issuances and has recently been used for leasing transactions including big ticket assets such as aircraft and ships.

The expansion of the range of investments in which a Section 110 company can invest is significant. In particular, the extension of the Section 110 regime to include plant and machinery has copper fastened Ireland as the leading global centre of excellence for aircraft financing transactions.

Finance Act 2016 introduced some changes which restrict the tax deductibility of profit participating interest payable by Section 110 companies on certain loans and similar assets which derive their value, or the greater part of their value, from Irish real estate. This change will apply in respect of profits earned on affected transactions after 6 September 2016. From this date, Section 110 companies will only be in a position to offset an arm’s length interest expense against income and gains from such transactions. Transactions entered into by Section 110 companies unrelated to Irish real estate will not be affected by the new rules and consequently profit participating interest should continue to be

fully tax deductible against profits from such transactions.

Real Estate Investment Trusts (REIT) The REIT is the internationally recognised collective investment structure for holding commercial and/or residential property. Although the regimes differ somewhat from country to country, the REIT typically takes the form of a listed company (or group) with a diverse shareholding base.

The primary objectives of the REIT regime are to facilitate the attraction of foreign investment capital to the Irish property market, to release bank financing from the property market for use by other sectors of the economy and to provide investors with an alternative lower-cost, lower-risk method for property investment.

The tax regime applicable to the Irish REIT is relatively straightforward. While the normal stamp duty rate (2%) applies to Irish property transfers into the REIT, the REIT itself is exempt from tax on rental income and on any capital gains arising on property disposals. However distributions out of the REIT to shareholders are liable to dividend withholding tax at the rate of 20% subject to a number of exceptions and comments:

• Irish resident shareholders are liable to tax on REIT distributions at their normal tax rates. Thus Irish resident individuals will generally be taxed at marginal rates with credit being allowed for the 20% withholding tax rate, while Irish corporates

will generally be taxed at the passive income rate of 25%. Capital gains (e.g. on the disposal of REIT shares) will be taxable at the normal CGT rate (currently 33%).

• Shareholders who are tax resident in countries that have a double taxation agreement with Ireland can benefit from a lower dividend withholding tax rate if that is provided for under the agreement. Although rates vary depending on the double taxation agreement, typically the treaty rate would be less than 20% and this would represent the final Irish tax liability of the foreign shareholder. Relief is not available at source and the tax would have to be reclaimed from Irish Revenue.

• Certain exempt investors such as pension funds and Irish regulated funds will not suffer any withholding tax.

For non-resident shareholders the REIT regime carries one particularly attractive feature. Capital gains generated by the REIT do not have to be distributed to shareholders and, if retained and reinvested by the REIT, will be reflected in its share price. The non-resident investor can then dispose of the REIT shares free of Irish CGT. This would not be available if the non-resident investor held the property directly. The disposal of the REIT shares would however be liable to stamp duty (at the rate of 1%) in the hands of the purchaser.

Three REITs currently exist and speculation is that more REITs may be listed where investors look to restructure investments into Irish Real Estate Funds (“IREFs”). Further tax changes

Financial services


to access Ireland’s double tax treaty network. The Section 110 regime has been in existence since the early 1990s and with appropriate planning effectively allows for corporation tax neutral treatment, provided that certain conditions are met. The regime is used by international banks, asset managers, and investment funds to facilitate securitisations, investment platforms, collateralised debt obligations (CDOs), collateralised loan obligations (CLOs) and capital markets bond issuances and has recently been used for leasing transactions including big ticket assets such as aircraft and ships.

The expansion of the range of investments in which a Section 110 company can invest is significant. In particular, the extension of the Section 110 regime to include plant and machinery has copper fastened Ireland as the leading global centre of excellence for aircraft financing transactions.

Finance Act 2016 introduced some changes which restrict the tax deductibility of profit participating interest payable by Section 110 companies on certain loans and similar assets which derive their value, or the greater part of their value, from Irish real estate. This change will apply in respect of profits earned on affected transactions after 6 September 2016. From this date, Section 110 companies will only be in a position to offset an arm’s length interest expense against income and gains from such transactions. Transactions entered into by Section 110 companies unrelated to Irish real estate will not be affected by the new rules and consequently profit participating interest should continue to be

fully tax deductible against profits from such transactions.

Real Estate Investment Trusts (REIT) The REIT is the internationally recognised collective investment structure for holding commercial and/or residential property. Although the regimes differ somewhat from country to country, the REIT typically takes the form of a listed company (or group) with a diverse shareholding base.

The primary objectives of the REIT regime are to facilitate the attraction of foreign investment capital to the Irish property market, to release bank financing from the property market for use by other sectors of the economy and to provide investors with an alternative lower-cost, lower-risk method for property investment.

The tax regime applicable to the Irish REIT is relatively straightforward. While the normal stamp duty rate (2%) applies to Irish property transfers into the REIT, the REIT itself is exempt from tax on rental income and on any capital gains arising on property disposals. However distributions out of the REIT to shareholders are liable to dividend withholding tax at the rate of 20% subject to a number of exceptions:

• Irish resident shareholders are liable to taxon REIT distributions at their normal taxrates. Thus Irish resident individuals willgenerally be taxed at marginal rates withcredit being allowed for the 20%withholding tax rate, while Irish corporates

will generally be taxed at the passive income rate of 25%. Capital gains (e.g. on the disposal of REIT shares) will be taxable at the normal CGT rate (currently 33%).

• Shareholders who are tax resident incountries that have a double taxationagreement with Ireland can benefit from a lower dividend withholding tax rate if thatis provided for under the agreement.Although rates vary depending on thedouble taxation agreement, typically thetreaty rate would be less than 20% and thiswould represent the final Irish tax liabilityof the foreign shareholder. Relief is notavailable at source and the tax would haveto be reclaimed from Irish Revenue.

• Certain exempt investors such as pensionfunds and Irish regulated funds will notsuffer any withholding tax.

For non-resident shareholders the REIT regime carries one particularly attractive feature. Capital gains generated by the REIT do not have to be distributed to shareholders and, if retained and reinvested by the REIT, will be reflected in its share price. The non-resident investor can then dispose of the REIT shares free of Irish CGT. This would not be available if the non-resident investor held the property directly. The disposal of the REIT shares would however be liable to stamp duty (at the rate of 1%) in the hands of the purchaser.

Three REITs currently exist and speculation is that more REITs may be listed where investors look to restructure investments into Irish Real Estate Funds (“IREFs”). Further tax changes

Financial servicesIndex

Welcome

Business taxation

Transfer Pricing


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Financial Services

Index

Welcome

Business taxation

Transfer Pricing


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Financial Services

17Tax Facts 2017

will be required if the Irish REIT is to become an attractive structure for holding international property but we understand that this feature is to be actively worked on and modifications may be expected in future Finance Acts.

Asset managementIreland has a favourable tax regime which has contributed to establishing it as a tried and trusted domicile of choice for investment funds. In 2016, fund assets administered in Ireland amounted to €3.86 trillion, with assets in Irish funds accounting for approximately €1.9 trillion. Ireland is the largest centre for administration of hedge fund assets (over 40% of global hedge fund assets are administered in Ireland).

Ireland was among the first countries to adapt its legislation for the tax-efficient implementation of the UCITS IV regime. Ireland’s tax rules also permit redomiciliations, mergers and reconstructions of investment funds without giving rise to adverse Irish tax consequences for funds of their investors.

Ireland was also one of the first jurisdictions to set out a detailed approach to the implementation of Alternative Investment Fund Managers Directive (AIFMD). It, among other things, provides for the appointment of alternative investment fund managers (AIFMs) located in one jurisdiction to manage alternative investment funds (AIFs) outside of their home jurisdiction. Similar to the legislative amendments introduced previously

with regards to the UCITS Management Company Passport, Finance Act 2015 confirms that the appointment of an Irish AIFM to manage non-Irish AIFs will not bring such non-Irish AIFs within the charge to Irish tax.

Irish fund management companies and service providers (e.g. fund administrators) are subject to Irish corporation tax at 12.5% on their trading profits.

Irish domiciled investment funds are exempt from Irish tax on their income and gains. Investment funds are required to operate a withholding tax, known as exit tax, on payments to taxable Irish individual investors at the rate of 41% on distributions and gains (on realisation of fund investment) and at the rate of 25% on payments (chargeable events) to Irish corporate investors. The holding of shares at the end of an eight year period (and each subsequent eight year anniversary) will constitute a deemed disposal on which exit tax may arise in respect of taxable Irish investors. Non-Irish resident and exempt Irish resident investors are not subject to exit tax on Irish investment funds provided relevant declarations are in place.

Dividends and interest received by Irish funds from Irish equity and bond investments should not be subject to Irish withholding taxes. In addition, no Irish stamp duty is payable on the issue, transfer, repurchase or redemption or shares in an Irish investment fund, (where a subscription/redemption is satisfied by the in specie transfer of Irish

securities or property, stamp duty may apply on such securities or property).

Most services received by Irish funds should be exempt from Irish VAT, including investment management services. Where VAT is suffered, recovery is possible where the fund holds a percentage of non-EU investments or has non-EU investors. To the extent that Irish funds are in receipt of taxable reverse charge services from abroad, they must register and self-account for Irish VAT.

The Irish funds industry continues to work with the Irish government and Irish Central Bank to explore and progress the development of new and existing products that will enhance Ireland’s competitiveness on the international stage.

Irish Real Estate FundsFinance Act 2016 introduced a new type of fund, an Irish Real Estate Fund (“IREF”). A fund will be considered an IREF where 25% or more of the market value of its assets are derived from Irish land or buildings. Consideration of whether a fund constitutes an IREF will, in the context of an umbrella scheme, be determined on an individual sub fund basis.

Where a fund is categorised as an IREF, 20% withholding tax must be operated by the fund on distributions of income. No tax applies in respect of gains on redemption except where those gains are derived from undistributed income or real estate disposed of within 5 years of acquisition. Gains derived from property held for at least 5 years are

Financial services


will be required if the Irish REIT is to become an attractive structure for holding international property but we understand that this feature is to be actively worked on and modifications may be expected in future Finance Acts.

Asset managementIreland has a favourable tax regime which has contributed to establishing it as a tried and trusted domicile of choice for investment funds. In 2016, fund assets administered in Ireland amounted to €3.86 trillion, with assets in Irish funds accounting for approximately €1.9 trillion. Ireland is the largest centre for administration of hedge fund assets (over 40% of global hedge fund assets are administered in Ireland).

Ireland was among the first countries to adapt its legislation for the tax-efficient implementation of the UCITS IV regime. Ireland’s tax rules also permit redomiciliations, mergers and reconstructions of investment funds without giving rise to adverse Irish tax consequences for funds of their investors.

Ireland was also one of the first jurisdictions to set out a detailed approach to the implementation of Alternative Investment Fund Managers Directive (AIFMD). It, among other things, provides for the appointment of alternative investment fund managers (AIFMs) located in one jurisdiction to manage alternative investment funds (AIFs) outside of their home jurisdiction. Similar to the legislative amendments introduced previously

with regards to the UCITS Management Company Passport, Irish legislation confirms that the appointment of an Irish AIFM to manage non-Irish AIFs will not bring such non-Irish AIFs within the charge to Irish tax.

Irish fund management companies and service providers (e.g. fund administrators) are subject to Irish corporation tax at 12.5% on their trading prof ts.

Irish domiciled investment funds are exempt from Irish tax on their income and gains. Investment funds are required to operate a withholding tax, known as exit tax, on payments to taxable Irish individual investors at the rate of 41% on distributions and gains (on realisation of fund investment) and at the rate of 25% on payments (chargeable events) to Irish corporate investors. The holding of shares at the end of an eight year period (and each subsequent eight year anniversary) will constitute a deemed disposal on which exit tax may arise in respect of taxable Irish investors. Non-Irish resident and exempt Irish resident investors are not subject to exit tax on Irish investment funds provided relevant declarations are in place.

Dividends and interest received by Irish funds from Irish equity and bond investments should not be subject to Irish withholding taxes. In addition, no Irish stamp duty is payable on the issue, transfer, repurchase or redemption or shares in an Irish investment fund, (where a subscription/redemption is satisf ed by the in specie transfer of Irish

securities or property, stamp duty may apply on such securities or property).

Most services received by Irish funds should be exempt from Irish VAT, including investment management services. Where VAT is suffered, recovery is possible where the fund holds a percentage of non-EU investments or has non-EU investors. To the extent that Irish funds are in receipt of taxable reverse charge services from abroad, they must register and self-account for Irish VAT.

The Irish funds industry continues to work with the Irish government and Irish Central Bank to explore and progress the development of new and existing products that will enhance Ireland’s competitiveness on the international stage.

Irish Real Estate FundsFinance Act 2016 introduced a new type of fund, an Irish Real Estate Fund (“IREF”). A fund will be considered an IREF where 25% or more of the market value of its assets are derived from Irish land or buildings. Consideration of whether a fund constitutes an IREF will, in the context of an umbrella scheme, be determined on an individual sub fund basis.

Where a fund is categorised as an IREF, 20% withholding tax must be operated by the fund on distributions of income. No tax applies in respect of gains on redemption except where those gains are derived from undistributed income or real estate disposed of within 5 years of acquisition. Gains derived from property held for at least 5 years are


Welcome

Business taxation

Transfer Pricing


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Financial Services

Index

Welcome

Business taxation

Transfer Pricing


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Financial Services

18Tax Facts 2017

specifically excluded from the scope of the withholding tax, unless the fund is classified as a personal portfolio IREF (“PPIREF”). Broadly, PPIREFs are funds where a unit holder or a person connected with the unit holder has the ability to influence the selection of some or all of the IREF assets.

Provision is made for various reliefs, exceptions and refunds including for Irish pension schemes, Irish regulated funds and life assurance funds and their EEA counterparts where subject to equivalent supervision and regulation.

The amendment will apply to accounting periods beginning on or after 1 January 2017.

All other Irish funds, falling outside of this new categorisation, will not be impacted by the proposed legislative changes.

Global Information Reporting (FATCA & CRS) The OECD released the Common Reporting Standard (“CRS”) in February 2014 which seeks to establish a new Global Standard for the Automatic Exchange of Information between Governments with regard to certain details of financial account holders with financial institutions. It entails the annual sharing of certain account holder information from the country of the source of the payment to the tax authorities in the account holder’s country of residence.

Currently, close to 100 jurisdictions have committed to implementing CRS and

exchanging information. The Irish regulations implementing CRS were signed on 22 December 2015 by the Minister of Finance and CRS came into effect in Ireland on 1 January 2016. The first filings will be due by 30 June 2017 in respect of the 2016 reporting period.

The OECD leveraged the US Foreign Account Tax Compliance Act (“FATCA”) to design CRS and as such CRS is broadly similar to the FATCA requirements, albeit with numerous alterations. It will result in a significantly higher number of reportable persons due to the increased instances of potentially in-scope accounts and the inclusion of multiple jurisdictions to which accounts (of tax residents of such jurisdictions) must be reported.

The financial institutions covered by the standard include custodial institutions, depository institutions, investment entities and specified insurance companies. The financial information to be reported with respect to reportable accounts includes interest, dividends, account balance or value, income from certain insurance products, sales proceeds from financial assets and other income generated with respect to assets held in the account or payments made with respect to the account. Reportable accounts include accounts held by individuals and entities (which includes certain companies, trusts and foundations), and the standard includes a requirement to look through passive entities to report on the relevant controlling persons. In addition to reporting the financial

institution must carry out appropriate due diligence on both pre-existing and new financial accounts, including obtaining self-certifications from new account holders upon opening the account.

CRS will operate alongside the requirement for financial institutions to report details of certain US persons under FATCA. In relation to FATCA, the first filing deadline occurred in Ireland on 31 July 2015 for the 2014 reporting period. Similar to CRS, the FATCA filing deadline for the 2016 reporting period is 30 June 2017.

Islamic finance Irish tax law facilitates most Islamic finance transactions, including ijara (leasing), takaful (insurance), re-takaful (reinsurance), murabaha and diminishing musharaka (credit arrangements), mudaraba and wakala (deposit arrangements) and sukuk. While there is no specific reference in the legislation to Islamic finance, rather the reference is to Specified Financial Transactions, overall, the premise of the legislation in Ireland is to ensure that Islamic finance transactions are treated in the same favourable manner as conventional financing transactions. The legislation also facilitates the favourable taxation (and tax impact) of UCITS management companies. The UCITS structure is one of the most commonly used structures for many different types of Islamic funds, such as retail Islamic equity funds, Shariah-compliant money market funds, Shariah-compliant exchange traded funds (ETFs), etc.

Financial services


specifically excluded from the scope of the withholding tax, unless the fund is classified as a personal portfolio IREF (“PPIREF”). Broadly, PPIREFs are funds where a unit holder or a person connected with the unit holder has the ability to influence the selection of some or all of the IREF assets.

Provision is made for various reliefs, exceptions and refunds including for Irish pension schemes, Irish regulated funds and life assurance funds and their EEA counterparts where subject to equivalent supervision and regulation.

The amendment will apply to accounting periods beginning on or after 1 January 2017.

All other Irish funds, falling outside of this new categorisation, will not be impacted by the proposed legislative changes.

Global Information Reporting (FATCA & CRS) The OECD released the Common Reporting Standard (“CRS”) in February 2014 which seeks to establish a new Global Standard for the Automatic Exchange of Information between Governments with regard to certain details of financial account holders with financial institutions. It entails the annual sharing of certain account holder information from the country of the source of the payment to the tax authorities in the account holder’s country of residence.

Currently, close to 100 jurisdictions have committed to implementing CRS and

exchanging information. The Irish regulations implementing CRS were signed on 22 December 2015 by the Minister of Finance and CRS came into effect in Ireland on 1 January 2016. The first filings will be due by 30 June 2017 in respect of the 2016 reporting period.

The OECD leveraged the US Foreign Account Tax Compliance Act (“FATCA”) to design CRS and as such CRS is broadly similar to the FATCA requirements, albeit with numerous alterations. It will result in a significantly higher number of reportable persons due to the increased instances of potentially in-scope accounts and the inclusion of multiple jurisdictions to which accounts (of tax residents of such jurisdictions) must be reported.

The financial institutions covered by the standard include custodial institutions, depository institutions, investment entities and specified insurance companies. The financial information to be reported with respect to reportable accounts includes interest, dividends, account balance or value, income from certain insurance products, sales proceeds from financial assets and other income generated with respect to assets held in the account or payments made with respect to the account. Reportable accounts include accounts held by individuals and entities (which includes certain companies, trusts and foundations), and the standard includes a requirement to look through passive entities to report on the relevant controlling persons. In addition to reporting the financial

institution must carry out appropriate due diligence on both pre-existing and new financial accounts, including obtaining self-certifications from new account holders upon opening the account.

CRS will operate alongside the requirement for financial institutions to report details of certain US persons under FATCA. In relation to FATCA, the first filing deadline occurred in Ireland on 31 July 2015 for the 2014 reporting period. Similar to CRS, the FATCA filing deadline for the 2016 reporting period is 30 June 2017.

Islamic finance Irish tax law facilitates most Islamic finance transactions, including ijara (leasing), takaful (insurance), re-takaful (reinsurance), murabaha and diminishing musharaka (credit arrangements), mudaraba and wakala (deposit arrangements) and sukuk. While there is no specific reference in the legislation to Islamic finance, rather the reference is to Specified Financial Transactions, overall, the premise of the legislation in Ireland is to ensure that Islamic finance transactions are treated in the same favourable manner as conventional financing transactions. The legislation also facilitates the favourable taxation (and tax impact) of UCITS management companies. The UCITS structure is one of the most commonly used structures for many different types of Islamic funds, such as retail Islamic equity funds, Shariah-compliant money market funds, Shariah-compliant exchange traded funds (ETFs), etc.


Welcome

Business taxation

Transfer Pricing


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Financial Services

Index

Welcome

Business taxation

Transfer Pricing


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Financial Services

19Tax Facts 2017

This demonstrates the Irish government’s desire to enhance the attractiveness of Ireland as a location for Islamic finance transactions by extending to this form of financing the relieving provisions that currently apply to conventional financing

Financial services


This demonstrates the Irish government’s desire to enhance the attractiveness of Ireland as a location for Islamic finance transactions

by extending to this form of financing the relieving provisions that currently apply to conventional financing

Financial services

Contact us:

Jim McDonnell Partner Financial Services t: 353 1 792 6836 e: [email protected]

John O’Leary Partner Financial Services t: 353 1 792 8659 e: [email protected]

Yvonne Thompson Partner Financial Services t: 353 1 792 7147 e: [email protected]

Marie Coady Partner Financial Services t: 353 1 792 6810 e: [email protected]

Brian Leonard Partner Financial Services t: 353 1 7926179 e: [email protected]

Index

Welcome

Business taxation

Transfer Pricing


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Financial Services

Index

Welcome

Business taxation

Transfer Pricing


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Financial Services

20Tax Facts 2017

Dividend WHT applies at 20% to dividends and other distributions made by Irish resident companies. However, an exemption may be available where the recipient of the dividend/distribution is either an Irish resident company which holds a 51% or greater shareholding in the company or a non-resident company eligible for the Parent-Subsidiary Directive (which in Ireland requires a 5% or greater shareholding).

Exemptions from dividend WHT are also available where the recipient of the distribution falls into one of the categories listed below and makes an appropriate declaration to the company paying the distribution in advance of the distribution. This declaration is self-assessed and valid for up to six years:

• Irish resident companies (as above, a declaration is not required for Irish resident companies which hold a 51% or greater shareholding in the company).

• Non-resident companies which are resident in a treaty country or in another EU member state, provided they are not controlled by Irish residents.

• Non-resident companies which are ultimately controlled by residents of a treaty country or another EU member state.

• Non-resident companies whose principal class of shares is traded on a recognised stock exchange in a treaty country or another EU member state or on any other stock exchange approved by the Minster for

Finance (or 75% subsidiaries of such companies).

• Non-resident companies which are wholly owned by two or more companies the principal class of shares of each of which is traded on a recognised stock exchange in a treaty country or another EU member state or on any other stock exchange approved by the Minister for Finance.

• Individuals who are resident in a treaty country or another EU member state.

• Certain pension funds, retirement funds, sports bodies, collective investment funds and employee share ownership trusts.

A company which makes a dividend/distribution is required, within 14 days following the end of the month in which the distribution is made, to make a return to Irish Revenue containing details of the recipient of the distribution, the amount of the distribution and the amount of any WHT required to be withheld. The return must be accompanied by payment of the tax withheld.

Interest WHTCertain annual interest payments are subject to WHT at 20%. Interest payments made by companies to companies resident in another EU member state or in a treaty country are generally not subject to WHT. The EU Interest and Royalties Directive may also provide an exemption from WHT for payments between associated companies. Furthermore, interest payments from one Irish resident company to another Irish resident company in the same

Irish tax group are generally not subject to WHT.

Royalties WHTRoyalties, other than patent royalties, are generally not subject to WHT under domestic law. Patent royalty payments and certain other annual payments are subject to WHT at 20%. Patent royalty payments made by companies to companies resident in another EU member state or in a treaty country are generally not subject to WHT. The EU Interest and Royalties Directive may also provide an exemption from WHT for payments between associated companies.

WHT on capital gainsWhere any of the following assets is disposed of, the person by whom or through whom the consideration is paid (i.e. the purchaser) must deduct capital gains WHT at a rate of 15% from the payment:

1. land or minerals in Ireland or exploration rights in the Irish continental shelf,

2. unquoted (unlisted) shares deriving their value or the greater part of their value (more than 50%) from assets described in (1) above,

3. unquoted (unlisted) shares issued in exchange for shares deriving their value or the greater part of their value from assets as described in (1) above, and

4. goodwill of a trade carried on in Ireland.



Dividend WHT applies at 20% to dividends and other distributions made by Irish resident companies. However, an exemption may be available where the recipient of the dividend/distribution is either an Irish resident company which holds a 51% or greater shareholding in the company or a non-resident company eligible for the EU Parent-Subsidiary Directive (which in Ireland requires a 5% or greater shareholding).

Exemptions from dividend WHT are also available where the recipient of the distribution falls into one of the categories listed below and makes an appropriate declaration to the company paying the distribution in advance of the distribution. This declaration is self-assessed and valid for up to six years:

• Irish resident companies (as above, adeclaration is not required for Irish residentcompanies which hold a 51% or greatershareholding in the company).

• Non-resident companies which are residentin a treaty country or in another EU memberstate, provided they are not controlled byIrish residents.

• Non-resident companies which areultimately controlled by residents of a treatycountry or another EU member state.

• Non-resident companies whose principalclass of shares is traded on a recognisedstock exchange in a treaty country oranother EU member state or on any otherstock exchange approved by the Minster for

Finance (or 75% subsidiaries of such companies).

• Non-resident companies which are whollyowned by two or more companies theprincipal class of shares of each of which istraded on a recognised stock exchange in atreaty country or another EU member stateor on any other stock exchange approved bythe Minister for Finance.

• Individuals who are resident in a treatycountry or another EU member state.

• Certain pension funds, retirement funds,sports bodies, collective investment fundsand employee share ownership trusts.

A company which makes a dividend/distribution is required, within 14 days following the end of the month in which the distribution is made, to make a return to Irish Revenue containing details of the recipient of the distribution, the amount of the distribution and the amount of any WHT required to be withheld. The return must be accompanied by payment of the tax withheld.

Interest WHTCertain annual interest payments are subject to WHT at 20%. Interest payments made by companies to companies resident in another EU member state or in a treaty country are generally not subject to WHT. The EU Interest and Royalties Directive may also provide an exemption from WHT for payments between associated companies. Furthermore, interest payments from one Irish resident company to another Irish resident company in the same

Irish tax group are generally not subject to WHT.

Royalties WHTRoyalties, other than patent royalties, are generally not subject to WHT under domestic law. Patent royalty payments and certain other annual payments are subject to WHT at 20%. Patent royalty payments made by companies to companies resident in another EU member state or in a treaty country are generally not subject to WHT. The EU Interest and Royalties Directive may also provide an exemption from WHT for payments between associated companies.

WHT on capital gainsWhere any of the following assets is disposed of, the person by whom or through whom the consideration is paid (i.e. the purchaser) must deduct capital gains WHT at a rate of 15% from the payment:

1. land or minerals in Ireland or explorationrights in the Irish continental shelf,

2. unquoted (unlisted) shares deriving theirvalue or the greater part of their value(more than 50%) from assets described in(1) above,

3. unquoted (unlisted) shares issued inexchange for shares deriving their valueor the greater part of their value fromassets as described in (1) above, and

4. goodwill of a trade carried on in Ireland.



Index

Welcome

Business taxation

Transfer Pricing

Financial Services

Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction


Index

Welcome

Business taxation

Transfer Pricing

Financial Services

Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

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Local taxes

Customs and Excise

Tax contacts



Introduction

21Tax Facts 2017

The requirement to withhold tax does not apply where the consideration does not exceed €500,000 (or €1 million in the case of houses disposed of after 1 January 2016) or where the person disposing of the asset produces a certificate from the Irish Revenue authorising payment in full. A clearance certificate may be obtained by making an application to Irish Revenue supported by a copy of the agreement or contract for sale. The certificate may be obtained on the grounds that (i) the vendor is Irish resident, (ii) that no capital gains tax is due in respect of the disposal or (iii) that the capital gains tax has been paid. WHT is creditable against the capital gains tax liability of the vendor, and any excess is refundable.

To avoid the requirement to withhold, clearance must be obtained before the consideration is paid. The withholding procedure is also required to be applied, and therefore clearance should also be obtained, where the asset is held as trading stock or where the transaction is intra-group and a capital gains tax liability does not arise. Failure to obtain the certificate will lead to the purchaser being assessed to capital gains tax for an amount of 15% of the consideration even if no capital gains tax liability would arise on the disposal of the asset.

Professional services withholding tax (PSWT)Income tax at the standard rate (currently 20%) is deducted from payments for professional services made to individuals and companies by “accountable persons”, which

include government departments, local authorities and health boards. Credit is granted for any PSWT withheld against the corporation tax (or income tax for an individual) liability of the accounting period in which tax is withheld.

WHT rate reductions and exemptionsExemptions and rate reductions apply under domestic law and under tax treaties. Where an exemption from WHT is not available, a reduced rate of WHT may apply under an applicable tax treaty (please refer to Appendix 1).



The requirement to withhold tax does not apply where the consideration does not exceed €500,000 (or €1 million in the case of houses disposed of after 1 January 2016) or where the person disposing of the asset produces a clearance certificate from Irish Revenue authorising payment in full. In the case of certain qualifying intra-group transfers of assets, the consideration is deemed to be the original cost of acquiring the asset by the vendor company.

A clearance certificate may be obtained by making an application to Irish Revenue supported by a copy of the agreement or contract for sale. The certificate may be obtained on the grounds that (i) the vendor is Irish resident, (ii) that no capital gains tax is due in respect of the disposal or (iii) that the capital gains tax has been paid. WHT is creditable against the capital gains tax liability of the vendor, and any excess is refundable.

To avoid the requirement to withhold, clearance must be obtained before the consideration is paid. The withholding procedure is also required to be applied, and therefore clearance should also be obtained, where the asset is held as trading stock or where the transaction is intra-group and a capital gains tax liability does not arise. Failure to obtain the certificate will lead to the purchaser being assessed to capital gains tax for an amount of 15% of the consideration even if no capital gains tax liability would arise on the disposal of the asset.

Professional services withholding tax (PSWT)

Income tax at the standard rate (currently 20%) is deducted from payments for professional services made to individuals and companies by “accountable persons”, which include government departments, local authorities and health boards. Credit is granted for any PSWT withheld against the corporation tax (or income tax for an individual) liability of the accounting period in which tax is withheld.

WHT rate reductions and exemptionsExemptions and rate reductions apply under domestic law and under tax treaties. Where an exemption from WHT is not available, a reduced rate of WHT may apply under an applicable tax treaty (please refer to Appendix 1).

Corporate - withholding taxes (WHT)Index

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Introduction


Index

Welcome

Business taxation

Transfer Pricing

Financial Services

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Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

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Customs and Excise

Tax contacts



Introduction


22Tax Facts 2017

Companies that are resident in Ireland may avail of the benefits of Ireland’s tax treaty network. These tax treaties secure a reduction or, in some cases, a total elimination of withholding tax on dividends, royalties and interest. See Appendix 1 and Appendix 2 for details of withholding tax on payments both to and from Ireland. Ireland has concluded, or is in the process of concluding, tax treaties with the following countries:

Tax treaties


Companies that are resident in Ireland may avail of the benefits of Ireland’s tax treaty network. These tax treaties secure a reduction or, in some cases, a total elimination of withholding tax on dividends, royalties and interest. See Appendix 1 and Appendix 2 for details of withholding tax on payments both to and from Ireland. Ireland has concluded, or is in the process of concluding, tax treaties with the following countries:

Treaties in force as at 1/1/2017

Albania Czech Republic Italy Netherlands Slovenia

Armenia Denmark Japan New Zealand South Africa

Australia Egypt Korea (Republic of) Norway Spain

Austria Estonia Kuwait Pakistan Sweden

Bahrain Ethiopia Latvia Panama Switzerland

Belarus Finland Lithuania Poland Thailand

Belgium France Luxembourg Portugal Turkey

Bosnia Herzegovina Georgia Macedonia Qatar Ukraine

Botswana Germany Malaysia Romania United Arab Emirates

Bulgaria Greece Malta Russia United Kingdom

Canada Hong Kong Mexico Saudi Arabia United States

Chile Hungary Moldova Serbia Uzbekistan

China Iceland Montenegro Singapore Vietnam

Croatia India Morocco Slovak Republic Zambia

Cyprus Israel

Tax treaties

Contact us:

Denis Harrington, Partner International Structuring t: 353 1 792 8629 e: [email protected]

Tax treaties

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Introduction

Tax treaties

Index

Welcome

Business taxation

Transfer Pricing

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Stamp duty


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Income tax

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Introduction

23Tax Facts 2017

GeneralVAT is a transaction based tax and is chargeable on the supply of goods or services in Ireland for consideration by an accountable person other than in the course or furtherance of an exempted activity. VAT is also chargeable on goods imported from outside the EU, on intra-Community acquisitions of goods and on the purchase of specified services from suppliers outside of Ireland. Please note that while VAT is governed by EU legislation, there are key differences in the VAT rules applied between the 28 Member States of the EU as each Member State is required to impose the EU VAT legislation by way of its own domestic legislation.

Certain persons carrying on business in Ireland whose annual turnover does not exceed the following thresholds are not required to register for and charge Irish VAT: €75,000 for goods and €37,500 for services. However, they can elect to register should they so wish.

The State, or any public body, is also regarded as an accountable person for VAT purposes in respect of certain activities carried out on a more than negligible scale, or in circumstances where by not treating the State or public body as an accountable person a significant distortion of competition would arise.

Foreign traders supplying certain taxable services in Ireland, or selling goods from stocks held or acquired in Ireland, are generally obliged to register for Irish VAT. Foreign traders do not benefit from the

registration thresholds unless the trader has a fixed place of business in Ireland. Foreign traders making distance sales (being the supply goods from abroad to unregistered persons) to Ireland are obliged to register for Irish VAT if the value of these sales exceeds €35,000 in a calendar year. Alternatively, they can elect to register should they so wish.

Taxable persons (persons engaging in business for VAT purposes) in receipt of certain services from abroad which are deemed to be supplied in Ireland (known as reverse charge services) must register for Irish VAT and account for Irish VAT on the value of those services (where appropriate). They are also obliged to register for VAT if they make intra-Community acquisitions of goods which exceed €41,000 in a 12 month period.

Accounting for VATPersons obliged to register for VAT must submit periodic VAT returns, generally bi-monthly; however in certain cases (typically low turnover thresholds), monthly, four monthly, bi-annual or annual returns may be submitted. Some accountable persons may elect to account for their VAT liability on the basis of cash received in a taxable period rather than on the basis of invoiced sales (see planning tip below for more information) which should result in cash-flow advantages.



GeneralVAT is a transaction based tax and is chargeable on the supply of goods or services in Ireland for consideration by an accountable person other than in the course or furtherance of an exempted activity. VAT is also chargeable on goods imported from outside the EU, on intra-Community acquisitions of goods and on the purchase of specified services from suppliers outside of Ireland. Please note that while VAT is governed by EU legislation, there are key differences in the VAT rules applied between the 28 Member States of the EU as each Member State is required to impose the EU VAT legislation by way of its own domestic legislation.

Certain persons carrying on business in Ireland whose annual turnover does not exceed the following thresholds are not required to register for and charge Irish VAT: €75,000 for goods and €37,500 for services. However, they can elect to register should they so wish.

The State, or any public body, is also regarded as an accountable person for VAT purposes in respect of certain activities carried out on a more than negligible scale, or in circumstances where by not treating the State or public body as an accountable person a significant distortion of competition would arise.

Foreign traders supplying certain taxable services in Ireland, or selling goods from stocks held or acquired in Ireland, are generally obliged to register for Irish VAT. Foreign traders do not benefit from the

registration thresholds unless the trader has a fixed place of business in Ireland. Foreign traders making distance sales (being the supply goods from another EU Member State to unregistered persons) to Ireland are obliged to register for Irish VAT if the value of these sales exceeds €35,000 in a calendar year. Alternatively, they can elect to register should they so wish.

Taxable persons (persons engaging in business for VAT purposes) in receipt of certain services from abroad which are deemed to be supplied in Ireland (known as reverse charge services) must register for Irish VAT and account for Irish VAT on the value of those services (where appropriate). They are also obliged to register for VAT if they make intra-Community acquisitions of goods which exceed €41,000 in a 12 month period.

Accounting for VATPersons obliged to register for VAT must submit periodic VAT returns, generally bi-monthly; however in certain cases (typically low VAT payment liability) monthly, four monthly, bi-annual or annual returns may be submitted. Some accountable persons may elect to account for their VAT liability on the basis of cash received in a taxable period rather than on the basis of invoiced sales (see planning tip below for more information) which should result in cash-f ow advantages.

Planning tip!

If you primarily supply goods or services to persons who are not registered for VAT or if your turnover is less than €2 million you may be eligible to account for VAT on a cash receipts basis rather than on the basis of invoiced sales.



Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties

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Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction


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Business taxation

Transfer Pricing

Financial Services


Tax treaties

Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

24Tax Facts 2017

Rates The rates of VAT and some of the supplies to which they apply are set out below:

* The “Jobs Initiative” (10 May 2011) announced the introduction of this temporary VAT rate of 9% for certain tourism related services. The reduced rate was effective from 1 July 2011and due to be in place up to 31 December 2013. However subsequent Finance Acts have confirmed that this reduced rate will continue to apply until further notice.

Exempt activitiesThe supply of certain goods and services is exempt from VAT including most banking and insurance services, education and training, medical services and passenger transport. If a supplier is engaged in exempt supplies, typically no input VAT deductibility on related costs is possible i.e. VAT is a real cost.

PropertyVAT on property rules were substantially changed on 1 July 2008. Transitional rules continue to apply to the supply of interests in immovable goods that were acquired or developed prior to 1 July 2008 and which are supplied on or after that date.

Under the ‘new’ post 1 July 2008 VAT on property regime, typical occupational lease interests in property are exempt from VAT (with a landlord’s “option to tax” the rent in certain circumstances i.e. charge VAT at the 23% standard rate). The supply of freehold and freehold equivalent interests in “new” property is subject to VAT at 13.5%. The sale of “old” property is exempt from VAT unless the vendor and purchaser exercise a joint option for taxation.

Examples of “new” property include:

• the first supply of a completed property within 5 years of its completion

• the second and subsequent supply of a completed property within 5 years of its completion unless it has been occupied for at least 2 years

• old property which has been significantly re-developed i.e. made ‘new’ again

Exempt supplies of property may result in a capital goods scheme (CGS) adjustment. The CGS was introduced as part of the ‘new’ regime on 1 July 2008. The CGS provides for the adjustment of VAT deductibility in respect of acquisition or development costs over the property’s ‘VAT life’ i.e. it monitors the use of the property for the purposes of input VAT deductibility. Typically the VAT life will be 20 years. However a 10-year VAT life applies in the case of refurbishment (development work on a previously completed building).

(formerly Section 13A)

Accountable persons may be authorised (by Irish Revenue) to import, to make intra-Community acquisitions of goods and to acquire most domestic goods and services at the zero-rate of Irish VAT if at least 75% of their annual turnover comprises of exports or zero-rated intra-Community supplies of goods. Suppliers to such qualifying persons should ensure they obtain a valid VAT56B prior to applying the zero rate of VAT. Such suppliers also have additional invoicing obligations.



Rates The rates of VAT and some of the supplies to which they apply are set out below:

Rates

23% The standard rate of VAT applies to supplies not subject to the rates below

13.5% Land and buildings (if taxable), building services, heating fuel, electricity, and waste disposal services

9%* Certain printed matter e.g. newspapers/periodicals, hotel/holiday accommodation, restaurant/ catering services, hairdressing services, cinemas, museums, art gallery exhibitions, certain musical performances, fairgrounds/amusement parks, facilities for taking part in sporting activities.

4.8% Supply of livestock (note - only live horses in certain circumstances).

0% Exports, books, oral medicine, children’s clothing & footwear, fertilizers and certain food products

Exempt activitiesThe supply of certain goods and services is exempt from VAT including most banking and insurance services, education and training, medical services and passenger transport. If a supplier is engaged in exempt supplies, typically no input VAT deductibility on related costs is possible i.e. VAT is a real cost.

PropertyVAT on property rules were substantially changed on 1 July 2008. Transitional rules continue to apply to the supply of interests in immovable goods that were acquired or developed prior to 1 July 2008 and which are supplied on or after that date.

Under the post 1 July 2008 VAT on property regime, typical occupational lease interests in property are exempt from VAT (with a landlord’s “option to tax” the rent in certain circumstances i.e. charge VAT at the 23% standard rate). The supply of freehold and freehold equivalent interests in “new” property is subject to VAT at 13.5%. The sale of “old” property is exempt from VAT unless the vendor and purchaser exercise a joint option for taxation.

Examples of “new” property include:

• the first supply of a completed propertywithin 5 years of its completion

• the second and subsequent supply of acompleted property within 5 years of itscompletion unless it has been occupied forat least 2 years

• old property which has been significantlyre-developed i.e. made ‘new’ again

Exempt supplies/use of property may result in a capital goods scheme (CGS) adjustment. The CGS was introduced on 1 July 2008. The CGS provides for the adjustment of VAT deductibility in respect of acquisition or development costs over the property’s ‘VAT life’ i.e. it monitors the use of the property for the purposes of input VAT deductibility. Typically the VAT life will be 20 years. However a 10-year VAT life applies in the case of refurbishment (development work on a previously completed building).

Planning tip!

Irish VAT on property rules are complex and specific advice should be sought in respect of all property related supplies. There can be pitfalls and planning opportunities.

Section 56 Authorisation (formerly Section 13A)Accountable persons may be authorised (by Irish Revenue) to import, to make intra-Community acquisitions of goods and to acquire most domestic goods and services at the zero-rate of Irish VAT if at least 75% of their annual turnover comprises of exports or zero-rated intra-Community supplies of goods. Suppliers to such qualifying persons should ensure they obtain a valid VAT56B from their customer prior to applying the zero rate of VAT. Such suppliers also have additional invoicing obligations.

Value added tax (VAT)Index

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Introduction


25Tax Facts 2017

Withdrawal of VAT credit for bills not paid within six monthsAs part of the Government’s initiatives to tackle the shadow economy and protect compliant businesses, measures were introduced in 2013 which provide that where payment for a supply of goods or services has not been made within six months of the period in which the VAT was deducted, i.e. the initial period, the purchaser will be obliged to adjust the amount of original deductible VAT accordingly.

The measures took effect for initial periods beginning on or after 1 January 2014. For example, VAT deducted on invoices received in Jan/Feb 2014 that remain unpaid in September should be adjusted in the July/August VAT return. If payment is subsequently made, in full or in part, the deductible VAT can be increased accordingly. It is important to note that where, on or before the due date for the return, the Revenue Commissioners are satisfied that there are reasonable grounds for not having paid the full amount, such a



Withdrawal of VAT credit for bills not paid within six monthsAs part of the Government’s initiatives to tackle the shadow economy and protect compliant businesses, measures were introduced in 2013 which provide that where payment for a supply of goods or services has not been made within six months of the period in which the VAT was deducted, i.e. the initial period, the purchaser will be obliged to adjust the amount of original deductible VAT accordingly.

The measures took effect for initial periods beginning on or after 1 January 2014. For example, VAT deducted on invoices received in Jan/Feb 2014 that remain unpaid in September should be adjusted in the July/August VAT return. If payment is subsequently made, in full or in part, the deductible VAT can be increased accordingly. It is important to note that where, on or before the due date for the return, the Revenue Commissioners are satisfied that there are reasonable grounds for not having paid the full amount, such a clawback of VAT will not be required.

Planning tip!

Remember to claim VAT bad debt relief at the earliest opportunity **

** VAT previously paid over on invoices which subsequently become reclassified as ‘bad debts’ can be reclaimed provided certain conditions are met


Contact us:

John Fay Partner t: 353 1 792 8701 e: [email protected]

Sean Brodie Partner t: 353 1 792 8619 e: [email protected]

Tom Corbett Partner t: 353 1 792 5462 e: [email protected]

Caroline McDonnell Partner t: 353 1 792 6526 e: [email protected]

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties

Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties

Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction


26Tax Facts 2017

Stamp duty is a tax on certain documents / instruments. It is payable on transfers of land and on other assets the title to which cannot be passed by delivery. It is chargeable on instruments of transfer executed in Ireland and on instruments, wherever executed, which relate to Irish property or relate to matters done or to be done in Ireland.

A form of stamp duty, known as a “levy”, also arises on certain policies of insurance and on certain financial cards and instruments.

Stamp duty on the transfer of assets between associated companies may be fully relieved from stamp duty provided the following key conditions are met:

• The companies have a 90% relationship (that is, one company is, directly or indirectly, the beneficial owner of at least 90% of the ordinary share capital of the other and is entitled to at least 90% of the profits available for distribution and at least 90% of the assets in the case of a winding-up of the other company, or a third company has these rights, directly or indirectly, in respect of both companies).

• This relationship is maintained for a period of at least two years after the transfer of the assets to avoid the relief being clawed back.

There is an exemption from stamp duty for transfers of intellectual property (IP). The categories of IP qualifying for this exemption are identical to those for which IP capital allowances are available (see Intellectual Property on page 5).

Stamp duty is payable based on the higher of (a) the consideration paid for the transfer and (b) the market value of the assets transferring.

Rates

Transfer/purchase of residential property

Transfer/purchase of other propertyWritten transfers of other types of property such as land, buildings, goodwill, book debts, cash on deposit and benefits of contracts attract stamp duty at a rate of 2%. Stocks and shares are liable to stamp duty of 1%. Gifts are chargeable on their market value at the same rates as for other conveyances.

Stamp duty


Stamp duty is a tax on certain documents / instruments. It is payable on transfers of land and on other assets the title to which cannot be passed by delivery. It is chargeable on instruments of transfer executed in Ireland and on instruments, wherever executed, which relate to Irish property or relate to matters done or to be done in Ireland.

A form of stamp duty, known as a “levy”, also arises on certain policies of insurance and on certain financial cards and instruments.

Stamp duty on the transfer of assets between associated companies may be fully relieved from stamp duty provided the following key conditions are met:

• The companies have a 90% relationship(that is, one company is, directly orindirectly, the beneficial owner of at least90% of the ordinary share capital of theother and is entitled to at least 90% of theprofits available for distribution and atleast 90% of the assets in the case of awinding-up of the other company, or athird company has these rights, directlyor indirectly, in respect of bothcompanies).

• This relationship is maintained for aperiod of at least two years after thetransfer of the assets to avoid the reliefbeing clawed back.

There is an exemption from stamp duty for transfers of intellectual property (IP). The categories of IP qualifying for this exemption are identical to those for which IP capital

allowances are available (see Intellectual Property on page 5 ).

Stamp duty is payable based on the higher of (a) the consideration paid for the transfer and(b) the market value of the assets transferring.

RatesRate

1% Transfer of certain stocks and shares (including share options)†

Nil Issue of shares

1% - 2% Transfer of property other than stocks and shares

1% - 2% Premiums on leases of houses, land and other real property

1% - 12% Average annual rent reserved by lease (rate depends on the length of the lease)

† transfers of shares not exceeding €1,000 in value are exempt.

Transfer/purchase of residential property

Value of property Rate

Up to €1,000,000 1%

Any excess over €1,000,000 2%

Transfer/purchase of other propertyWritten transfers of other types of property such as land, buildings, goodwill, book debts, cash on deposit and benefits of contracts attract stamp duty at a rate of 2%. Stocks and shares are liable to stamp duty of 1%. Gifts are chargeable on their market value at the same rates as for other conveyances.

Planning tip!

Always seek advice before executing a Business Purchase Agreement. Careful drafting can help to minimise the stamp duty liability.

Stamp duty

Stamp duty

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties



Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Stamp duty

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties



Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

27Tax Facts 2017

Exemptions and reliefs

Stamp duty


Exemptions and reliefs

Transaction Stamp Duty Analysis

Transfers between associated companies where the necessary 90% beneficial ownership relationship exists and where certain other conditions are satisfied

Full relief available

Transfers on certain reorganisations, takeovers and mergers Full relief available

Most transfers of surplus assets by liquidator to shareholder Nil

Transfers of intellectual property, such as copyright, trademarks, brands and patents

Exempt

Most transfers of foreign shares and foreign land Exempt

A wide range of financial services instruments Exempt

Transfers of Irish government stocks Exempt

Transfers under wills Exempt

Transfers between spouses or civil partners (including certain transfers on divorce/dissolution)

Exempt

Transfers of carbon credits Exempt

Stamp duty

Contact us:

Darragh Duane Director t: 353 1 792 6313 e: [email protected]

Planning tip!

Remember that transfers of assets between spouses or civil partners are exempt from stamp duty. If you are married or in a civil partnership you should consider whether you hold your assets in the most tax efficient manner.

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties



Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Stamp duty

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties



Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Stamp duty

28Tax Facts 2017

Relevant Contracts Tax (RCT) is a withholding tax on payments by Principal Contractors (as defined) to subcontractors under a “relevant contract” in respect of works defined as “relevant operations”.

While the common perception is that it is of relevance only to the construction, meat processing or forestry industries, a broad range of businesses have found that they are required to withhold RCT from payments to contractors. Examples of non-construction type companies where RCT can apply are hospitals, banks, telecommunication companies, oil and gas undertakings, supermarkets, utility companies and local authorities. A person connected with a company engaged in construction, land development, meat processing or forestry activities may also be subject to RCT.

The broad category of Principals liable to deduct RCT from payments means that many individuals and companies need to evaluate, in advance of making payments to contractors, the impact of RCT in order to avoid a costly tax settlement.

Wide scope of RCT As above, telecommunications companies and others in that sector, including companies involved in the alteration and repair of telecommunications systems, are regarded as Principal Contractors for RCT purposes and are required to operate RCT procedures in respect of payments to subcontractors for relevant operations. RCT applies to works

carried out in the territory of Ireland, its territorial waters and designated areas of the Continental Shelf. The designated areas of the Continental Shelf are the extension of Ireland’s territorial waters where the natural land extends under the sea to the outer edge of the continental margin.

The definition of ‘relevant operations’ includes, in addition to installation, the repair and alteration of systems such as heating, lighting, telecommunications, power supply, water supply, air conditioning, ventilation, security, drainage and sanitation systems.

In recent years the RCT base has been broadened considerably requiring many entities, in particular those in the telecommunications industry, to evaluate the scope of RCT and the extent of its application to their businesses.

Operation of RCTRCT operates through an electronic system (eRCT). The Irish Revenue Online system (ROS) has three RCT rates: 0%, 20% and 35%. The rate that is applied to a subcontractor depends on the subcontractor’s compliance record. Criteria for the rates are summarised as follows:

• 0% rate - subcontractors fully tax compliant (among other conditions)

• 20% rate - subcontractors registered for tax, are tax compliant and have received zero rate authorization from Revenue

• 35% rate - subcontractors not registered for tax or with poor tax compliance

The scheme involves the mandatory use of electronic means for sending information, filing returns and making payments through Revenue On-line system (ROS). Principal contractors must notify all contracts online and notify Irish Revenue in advance of making payments to subcontractors. Revenue will then confirm the RCT rate to apply to a subcontractor payment and authorise the Principal to make the payment.

There are four main stages to the eRCT system:

1. Contract Notification Stage: Principals must notify Revenue upon entering into a relevant contract, providing Revenue with online details of the contract and subcontractor.



Relevant Contracts Tax (RCT) is a withholding tax on payments by Principal Contractors (as defined) to subcontractors under a “relevant contract” in respect of works defined as “relevant operations”.

While the common perception is that it is of relevance only to the construction, meat processing or forestry industries, a broad range of businesses have found that they are required to withhold RCT from payments to contractors. Examples of non-construction type companies where RCT can apply are hospitals, banks, telecommunication companies, oil and gas undertakings, supermarkets, utility companies and local authorities. A person connected with a company engaged in construction, land development, meat processing or forestry activities may also be subject to RCT.

The broad category of Principals that can fall within the scope of RCT means that individuals and companies need to evaluate, in advance of making payments to contractors, the impact of RCT in order to avoid a costly tax settlement.

Wide scope of RCT As above, telecommunications companies and others in that sector, including companies involved in the alteration and repair of telecommunications systems, are regarded as Principal Contractors for RCT purposes and are required to operate the RCT procedures in respect of payments to subcontractors for relevant operations.

The definition of ‘relevant operations’ includes the installation, the repair and the alteration of systems such as heating, lighting, telecommunications, power supply, water supply, air conditioning, ventilation, security, drainage and sanitation systems.

RCT applies to works carried out in the territory of Ireland, its territorial waters and designated areas of the Continental Shelf. The designated areas of the Continental Shelf are the extension of Ireland’s territorial waters where the natural land extends under the sea to the outer edge of the continental margin.

Operation of RCTRCT operates through an electronic system (eRCT). The Irish Revenue Online system (ROS) has three RCT rates: 0%, 20% and 35%. The rate that is applied to a subcontractor depends on the subcontractor’s compliance record. Criteria for the rates are summarised as follows:

• 0% rate - subcontractors fully tax compliant and have obtained zero rate authorisation approval from Revenue.

• 20% rate (standard rate) - subcontractors registered for tax, are mainly tax compliant, however have not received zero rate authorization from Revenue

• 35% rate - subcontractors not registered for tax or with a history of poor tax compliance

The scheme involves the mandatory use of electronic means for sending information, filing returns and making payments through the Revenue Online system (ROS). Principal contractors must notify all contracts online and notify Irish Revenue in advance of making payments to subcontractors. Revenue will then confirm the RCT rate to apply to a subcontractor payment and authorise the Principal to make the payment.

RCT withheld will be treated as a payment on account and available for offset against other tax liabilities including PAYE or VAT or for repayment at year-end.

There are significant penalties for non-operation of RCT by a Principal Contractor. From 2015, the penalties for non-compliance range from 3% to 35% of the gross payment amount and are dependent on the tax compliance position of the subcontractor. As the RCT base has been broadened considerably in recent years, it requires many entities (including those in the telecommunications industry), to evaluate the scope of RCT and the extent of its application to their businesses.



Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty

Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty

Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

29Tax Facts 2017

2. Payment Notification Stage: Principals must notify Revenue in advance of making a payment to a subcontractor of their intention to make the payment and the gross amount of that payment.

3. Deduction Notification Stage: Revenue will respond with the rate of RCT which should be withheld from that payment. Principals should then provide each subcontractor with a copy of the Deduction Authorisation issued by Revenue.

4. Deduction Summary Stage: Revenue will issue a Deduction Summary online at the end of the return period, listing all payments which have been notified to them. Principals are responsible for reviewing the Deduction Summary to ensure it is correct, and arranging payment of the RCT due on or before the due date.

RCT withheld will be treated as a payment on account and available for offset against other tax liabilities including PAYE or VAT or for repayment at year-end.

There are significant penalties for non-compliance with the online operation of RCT.



Contact us:

Emer O’Sullivan Director t: 353 1 792 6695 e: [email protected]

Jim Kinahan Senior Manager t: 353 1 792 8641 e: [email protected]

Elaine O’Rourke Senior Manager t: 353 1 792 5098 e: [email protected]

Relevant contracts tax (RCT)Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty

Interest

Local Property Tax

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Employee taxation


PRSI


Pension schemes

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Local taxes

Customs and excise

Tax contacts



Introduction


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty

Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction


30Tax Facts 2017

Interest paid/payableRelief is available for interest payable in respect of money borrowed:

• for the purpose of a trade or profession carried on by an individual or company (but may be restricted in certain tax avoidance situations)

• for the purchase, improvement or repair of a rented property except that, in the case of a residential premises, relief is subject to conditions which includes that the deduction may not exceed 75% of the interest otherwise allowable. Finance Act 2015 introduced measures whereby a 100% interest deduction can be claimed for certain qualifying lettings.

Relief is also available for interest on money borrowed to acquire an interest in or to lend to a company, as follows:

Company borrowings

Relief is available to a company for interest paid on moneys borrowed to acquire an interest in, or to lend to, a company which is a trading company, a rental company or a holding company of trading or rental companies. To qualify for relief, the investing company must have:

• a material interest (more than 5% of the equity) in the company in which it is investing and, where moneys on-lent are used by a company connected with that company, in the connected company, and

• at least one director who is also a director of the investee company and, where moneys on-lent are used by a connected company, of the connected company.

Certain additional conditions also apply. For instance, where the money is lent to, or is subscribed for newly issued share capital of a company, it must be used for the specific trading, rental or holding company activities of that company or of a connected company. There is a restriction on the amount of interest relief available to an investing company providing funds to a company where the funds are used to acquire specified intangible assets upon which the company is entitled to claim capital allowances.

Anti-avoidance provisions deny or restrict relief for interest on related party borrowings for the acquisition of related entities, or the acquisition of assets or trades from a related party. These measures are subject to a number of conditions.

“Recovery of capital” and other anti-avoidance measures also restrict relief for interest on both related and third party

Individual borrowings

Relief was previously available to an individual for interest paid on moneys borrowed to acquire an interest in or to lend to a trading company or holding company where certain conditions were met.

Interest relief was abolished in respect of loans, including replacement loans, made on or after 7 December 2010 with a phasing out period to 2013 for loans made before that date.

Loans to acquire Interest in a PartnershipTax relief on interest payable on a loan to purchase a share in or to contribute to certain partnerships has been abolished in respect of loans made after 15 October 2013, with a phasing out period to 2017 for loans made before that date. However, the cessation provisions do not apply to farm partnerships.

Interest


Interest paid/payableRelief is available for interest payable in respect of money borrowed:

• for the purpose of a trade or professioncarried on by an individual or company (butmay be restricted in certain tax avoidancesituations)

• for the purchase, improvement or repair of arented property except that, in the case of aresidential premises, relief is subject toconditions which includes that thededuction may not exceed 75% of theinterest otherwise allowable. Finance Act2015 introduced measures whereby a 100%interest deduction can be claimed forcertain qualifying lettings.

Relief is available to a company for interest paid on moneys borrowed to acquire an interest in, or to lend to, a company which is a trading company, a rental company or a holding company of trading or rental companies. To qualify for relief, the investing company must have:

• a material interest (more than 5% of theequity) in the company in which it isinvesting and, where moneys on-lent areused by a company connected with thatcompany, in the connected company, and

• at least one director who is also a director ofthe investee company and, where moneyson-lent are used by a connected company, ofthe connected company.

Certain additional conditions also apply. For instance, where the money is lent to, or is subscribed for newly issued share capital of a company, it must be used for the specific trading, rental or holding company activities of that company or of a connected company. There is a restriction on the amount of interest relief available to an investing company providing funds to a company where the funds are used to acquire specified intangible assets upon which the company is entitled to claim capital allowances.

Anti-avoidance provisions deny or restrict relief for interest on related party borrowings for the acquisition of related entities, or the acquisition of assets or trades from a related party. These measures are subject to a number of conditions.

“Recovery of capital” and other anti-avoidance measures also restrict relief for interest on both related and third party borrowings.

Planning tip!

Review your company structure annually to ensure that the conditions for interest relief remain satisfied.

Loans to acquire Interest in a PartnershipTax relief on interest payable on a loan to purchase a share in or to contribute to certain partnerships has been abolished in respect of loans made after 15 October 2013, with a phasing out period to 2017 for loans made before that date. However, the cessation provisions do not apply to farm partnerships.

Interest

Interest

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Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Interest

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

31Tax Facts 2017

Deposit interest retention tax (DIRT)From 1 January 2014, the rate of DIRT on deposit interest is 41%.The rate of DIRT has been standardised so that the rate of 41% applies to both annual or more frequent payments (previously subject to a 33% DIRT rate) and also less frequent payments (previously subject to a 36% DIRT rate).

Exemptions and repayments

The following can apply to have DIRT repaid or to have deposit interest paid to them without the deduction of DIRT:

• individuals or their spouses or civil partner aged 65 or over who are not liable to income tax

• incapacitated individuals

• non-residents

• charities

• companies that are liable to corporation tax

DIRT & First Time BuyersFirst time buyers are entitled to a refund of DIRT in respect of interest earned on savings to be used either to buy or build a dwelling. The refund applies to DIRT deducted from interest paid on savings up to a maximum of 20% of the purchase price or the completion value. The relief applies in respect of purchases or builds completed and suitable for occupation between 14 October 2014 and 31

Interest


• individuals or their spouses or civil partneraged 65 or over who are not liable to incometax

• incapacitated individuals

• non-residents

• charities

• companies that are liable to corporation tax

DIRT & First Time BuyersFirst time buyers are entitled to a refund of DIRT in respect of interest earned on savings to be used either to buy or build a dwelling. The refund applies to DIRT deducted from interest paid on savings up to a maximum of 20% of the purchase price or the completion value. The relief applies in respect of purchases or builds completed and suitable for occupation between 14 October 2014 and 31 December 2017.

Planning tip!

Unlike other investment income, EU deposit interest is not liable to the Universal Social Charge. However, a higher 40% income tax rate will apply if the income is not declared on a tax return by the due date.

Interest

Deposit interest retention tax (DIRT)From 1 January 2014, the rate of DIRT on deposit interest is 41%. With effect from 1 January 2017, the rate of DIRT has dropped to 39% with a Government commitment to reduce the rate to 33% over the next four tax years.

Exemptions and repayments

The following can apply to have DIRT repaid or to have deposit interest paid to them without the deduction of DIRT:

Contact us:

Sean Walsh Senior Manager t: 353 1 792 6543 e: [email protected]

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Interest

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Interest

32Tax Facts 2017

Local Property Tax payable in respect of residential properties operates through a system of self-assessment. The following persons are liable to pay LPT:

• Owners of Irish residential property, regardless of whether they live in Ireland or not.

• Local authorities or social housing organisations that own and provide social housing.

• Lessees who hold long-term leases of residential property (for 20 years or more).

• Holders of a life-interest in a residential property.

• Persons with a long-term right of residence (for life or for 20 years or more) that entitles them to exclude any other person from the property.

• Landlords where the property is rented under a short-term lease (for less than 20 years).

• Personal representatives for a deceased owner (e.g. executor/administrator of an estate).

• Trustees, where a property is held in a trust.

• Where none of the above categories of liable person applies, the person who occupies the property on a rent-free basis and without challenge to that occupation.

The liable person in respect of the property is responsible for completing and submitting the Return and paying the tax due. For LPT purposes, residential property means any

building or structure (or part of a building) which is used as, or is suitable for use as, a dwelling and includes any shed, outhouse, garage or other building or structure and includes grounds of up to one acre.

For 2016, an LPT liability will arise where a person owns a residential property in the State on 1 November 2015. LPT will be based on the market value of a residential property on the “valuation date”, i.e. 1 May 2013 for the four year period until 2016.

LPT RatesThe LPT rate is 0.18% for properties up to a market value of €1 million. Above €100,000 there is a system of market value bands of €50,000 up to €1 million and the tax liability will be calculated by applying the tax rate to the mid-point of the band. LPT on residential properties valued at over €1 million will be charged at 0.18% on the first €1 million and 0.25% on the excess over €1 million.

For 2016, some local authorities have reduced their LPT rate resulting in six different LPT rates. The reductions range from 1.5% to 15%. Revenue will make the changes automatically.

Local Property Tax


Local Property Tax payable in respect of residential properties operates through a system of self-assessment. The following persons are liable to pay LPT:

• Owners of Irish residential property,regardless of whether they live in Ireland ornot.

• Local authorities or social housingorganisations that own and provide socialhousing.

• Lessees who hold long-term leases ofresidential property (for 20 years or more).

• Holders of a life-interest in a residentialproperty.

• Persons with a long-term right of residence(for life or for 20 years or more) that entitlesthem to exclude any other person from theproperty.

• Landlords where the property is rentedunder a short-term lease (for less than 20years).

• Personal representatives for a deceasedowner (e.g. executor/administrator of anestate).

• Trustees, where a property is held in a trust.

• Where none of the above categories of liableperson applies, the person who occupies theproperty on a rent-free basis and withoutchallenge to that occupation.

The liable person in respect of the property is responsible for completing and submitting the Return and paying the tax due. For LPT purposes, residential property means any

building or structure (or part of a building) which is used as, or is suitable for use as, a dwelling and includes any shed, outhouse, garage or other building or structure and includes grounds of up to one acre.

For 2017, an LPT liability will arise where a person owns a residential property in the State on 1 November 2016. LPT will be based on the market value of a residential property on the “valuation date”, i.e. 1 May 2013.

LPT RatesThe LPT rate is 0.18% for properties up to a market value of €1 million. Above €100,000 there is a system of market value bands of €50,000 up to €1 million and the tax liability will be calculated by applying the tax rate to the mid-point of the band. LPT on residential properties valued at over €1 million will be charged at 0.18% on the first €1 million and 0.25% on the excess over €1 million.

For 2017, some local authorities have reduced their LPT rate. The reductions range from 3% to 15%. Revenue will make the changes automatically.

LPT rate reduced by

Local authority

3% Longford

15% Dublin City, Dun Laoghaire/ Rathdown, Fingal, South Dublin

For 2017, some local authorities have increased their LPT. The reductions range from 5% to 10%. Revenue will make the changes automatically

LPT rate reduced by

Local authority

5% Wexford

15% Galway, Limerick City and County

Local Property Tax

Local Property Tax

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Introduction

33Tax Facts 2017

ReturnsThe 2016 Payment Instruction was due to be submitted to Irish Revenue by 25 November 2015. Payment was due by 7 January 2016. As outlined above, a property is not required to be revalued for 2016. The market value / valuation band declared on the 2013 LPT1 Return applies for the period 2013 – 2016. Any work carried out on a residential property under the Home Renovation Incentive will not affect the amount of LPT payable for 2014, 2015 and 2016.

If arrangements have not been made to pay the tax in full or by phased payments throughout 2016, the liable person should access the Revenue LPT On-line system immediately to file a 2016 Payment Instruction in order to minimise interest charges. If the liable person paid the 2015LPT by phased payment method, deferred the full charge or claimed an exemption, the current payment method/ exemption will automatically apply for 2016 and there is no requirement to contact Revenue.

There are various payment methods including payment by Single Debit Authority, Debit/Credit Card, Direct Debit and voluntary deduction at source from salary, an occupational pension and certain payments from Department of Social Protection or the Department of Agriculture, Food and the Marine. Where a liable person does not elect a method, the Irish Revenue may deduct the tax due at source (through the PAYE system, social welfare payments etc).

Late Payment/Non-ComplianceIf a liable person fails to submit a return, the Irish Revenue can estimate the LPT due. A rate of 8% per annum will be charged on the amount outstanding. A maximum penalty of €3,000 will be imposed for failure to submit a return or for knowingly undervaluing property to reduce LPT payable. Where the LPT remains outstanding, a charge will attach to the property.

Chargeable Persons for Income Tax/ Corporation Tax/ Capital Gains Tax who are also designated liable persons for LPT may incur a LPT generated surcharge of 10% of their Income Tax/ Corporation Tax/ Capital Gains Tax liability, where the LPT return is outstanding or an agreed payment arrangement is not being met at the date of filing the Income Tax/ Corporation Tax/ Capital Gains Tax Return. There are a limited number of exemptions available.

Local Property Tax


ReturnsThe 2017 Payment Instruction was due to be submitted to Irish Revenue by 25 November 2016. Payment was due by 11 January 2017. As outlined above, a property is not required to be revalued for 2017. The market value / valuation band declared on the 2013 LPT1 Return applies. Any work carried out on a residential property under the Home Renovation Incentive will not affect the amount of LPT payable.

If arrangements have not been made to pay the tax in full or by phased payments throughout 2017, the liable person should access the Revenue LPT On-line system immediately to file a 2017 Payment Instruction in order to minimise interest charges. If the liable person paid the 2016 LPT by phased payment method, deferred the full charge or claimed an exemption, the current payment method/ exemption will automatically apply for 2017 and there is no requirement to contact Revenue.

There are various payment methods including payment by Single Debit Authority, Debit/Credit Card, Direct Debit and voluntary deduction at source from salary, an occupational pension and certain payments from Department of Social Protection or the Department of Agriculture, Food and the Marine. Where a liable person does not elect a method, Irish Revenue may deduct the tax due at source (through the PAYE system, social welfare payments etc).

Late Payment/Non-ComplianceIf a liable person fails to submit a return, Irish Revenue can estimate the LPT due. A rate of 8% per annum will be charged on the amount outstanding. A maximum penalty of €3,000 will be imposed for failure to submit a return or for knowingly undervaluing property to reduce LPT payable. Where the LPT remains outstanding, a charge will attach to the property.

Chargeable Persons for Income Tax/ Corporation Tax/ Capital Gains Tax who are also designated liable persons for LPT may incur a LPT generated surcharge of 10% of their Income Tax/ Corporation Tax/ Capital Gains Tax liability, where the LPT return is outstanding or an agreed payment arrangement is not being met at the date of filing the Income Tax/ Corporation Tax/ Capital Gains Tax Return. There are a limited number of exemptions available.

Local Property Tax

Contact us:

Lisa McCourt Senior Manager t: 353 1 792 7492 e: [email protected]

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Local Property Tax

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Local Property Tax

34Tax Facts 2017

Income tax

Main personal tax credits and reliefs

a. with effect from 1 January 2014, available for the principal carer of the child only

b. reducing credit available for subsequent years

c. where carer’s income exceeds €€7,200, the tax credit is reduced by one half of the excess

d. the relief is restricted to the first €1,000 per adult insured and the first €500 per child insured

e. the maximum limit on qualifying fees is €7,000 per person per course. The first €2,750 paid for fulltime courses and the first €1,375 paid for part time courses is disregarded for the purpose of calculating the relief

f. expenses paid to nursing homes which provide 24 hour nursing care are tax relieved at the marginal tax rate


Income tax

Main personal tax credits and reliefs

2017 2016

Single person with no dependent child 1,650 1,650

Married or in a civil partnership 3,300 3,300

Widowed person or surviving civil partner with no dependent child 2,190 2,190

Widowed person or surviving civil partner bereaved in the year 3,300 3,300

Single person with dependent child a 3,300 3,300

Widowed parent or surviving civil partner with dependent child - first year after bereavement b 5,250 5,250

Incapacitated child 3,300 3,300

Married couple or civil partnership - home carer c 1,100 1,000

Blind person’s tax credit: Single, married or in a civil partnership (one blind) 1,650 1,650

Married or in a civil partnership (both blind) 3,300 3,300

Dependent relative 70 70

Age tax credit - Single, widowed or surviving civil partner - Married or in a civil partnership

245 490

245 490

Employee (PAYE) tax credit 1,650 1,650

Earned income tax credit 950 550

Dental insurance d standard rate standard rate

Certain fees for third level colleges - maximum qualifying fees e

standard rate 7,000

standard rate 7,000

Medical expenses f standard rate standard rate

Fisher tax credit (max) g 1,270 Nil

a. with effect from 1 January 2014, available for the principal carer of the child only

b. reducing credit available for subsequent years

c. full credit is available where the carer’s income is €7,200 or less. A reduced tax credit applies where income is over €7,200 and no more than €9,400.

d. the relief is restricted to the first €1,000 per adult insured and the first €500 per child insured

e. the maximum limit on qualifying fees is €7,000 per person per course. The first €3,000 paid for fulltime courses and the first €1,500 paid for part-time courses is disregarded for the purposes of calculating the relief.

f. expenses paid to nursing homes which provide 24 hour nursing care are tax relieved at the marginal tax rate

g. With effect from 1 January 2017, credit is calculated at 20% of the income from fishing, subject to a maximum of €1,270 (2017). It is available where a person spends a total of 8 hours per day for a minimum of 80 days per year fishing in a registered fishing vessel. A claim for the seafarer's allowance cannot also be made in the same year.

Medical insurance d standard rate standard rate

Income tax

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Income tax

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

35Tax Facts 2017

Main tax allowancese is in place to 2020. The high earner’s restriction on the EII is not in place for a period of three years where the subscription for eligible shares is made after 15 October 2013a. The Film Tax Relief Scheme is extended to 2020. The scheme has been reformed and

has moved to a film corporation tax credit model with effect from 1 January 2015. Film relief is a“specified relief” for the purpose of the high income earners restriction; see page 40 for details on how this restriction may affect the relief

b. the applicable percentage rate is based on age; see page 51 “Pension schemes” for details

c. the applicable percentage rate is based on age; see page 51 “Pension schemes” for details

Income tax exemption limitsa. There is an increase of €575 for each of the first two qualifying children and €830 for each

subsequent child.

Income tax ratesa. ailable for the principal carer of the child only

Income tax


Main tax allowances

Allowances at marginal rate 2017 €

2016 €

Employment and Investment scheme (EII)- maximum qualifying investment per annum a

150,000 150,000

Pension contributions

Retirement annuity contracts - maximum % of net relevant earnings b

Occupational pensions - maximum % of earnings limit b

Permanent health benefit schemes - maximum % of statutory income

15%-40%

15%-40%

10%

15%-40%

15%-40%

10%

a. The EII scheme is in place to 2020.Finance (No. 2) Act 2013 provided for the removal of the EII, relating to investments in qualifying companies from 15 October 2013 to 31 December 2016, from the list of specified reliefs caught by the High Earners Restriction. Finance Act 2016 extended the exclusion of the EII from the High Earner’s Restriction for subscriptions of eligible shares made on or after 1 January 2017.

b. the applicable percentage rate is based on age; see page 52 “Pension schemes” for details

Income tax exemption limits

Persons aged 65 and over 2017 €

2016 €

Single, widowed or surviving civil partner a 18,000 18,000

Married or in a civil partnership a 36,000 36,000

a. There is an increase of €575 for each of the first two qualifying children and €830 for each subsequent child.

Income tax rates

2017 €

2016 €

20% 40% 20% 40%

Single, widowed or surviving civil partner: no dependent children

33,800 balance 33,800 balance

Single a, widowed or surviving civil partner: dependent children

37,800 balance 37,800 balance

Married couple or civil partnership: one income 42,800 balance 42,800 balance

Married couple or civil partnership: both with incomes

42,800 (with an increase of up to €24,800

max b)

balance

42,800 (with an increase of up to €24,800

max b)

balance

a. This rate is available for the principal carer of the child only

b. The increase in the standard rate tax band is restricted to the lower of (i) €24,800 or (ii)

the amount of the income of the spouse or civil partner with the lower income

Income taxIndex

Welcome

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Introduction

Income tax

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Employee taxation


PRSI


Pension schemes

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Tax contacts



Introduction

Income tax

36Tax Facts 2017

Maternity BenefitWith effect from 1 July 2013, maternity benefit, adoptive benefit and health and safety benefit are treated as taxable income and taxed under Schedule E as employment income. They remain exempt from PRSI and Universal Social Charge (USC).

Alimony/maintenance paymentsIn general, for payments under legally enforceable maintenance agreements, income tax is not deducted at source and the payer deducts the payments in computing total income for the tax year. The payments are assessed for income tax purposes as the recipient’s income. Payments for the benefit of a child are made without deduction of tax at source and do not reduce the total income of the payer for income tax purposes. Separated/divorced spouses and civil partners are treated for tax purposes as single persons.

Personal InsolvencyA number of changes to the law were made in 2013 in order to facilitate the personal insolvency legislation introduced in 2012.

Firstly, the transfer of property under a Debt Settlement Arrangement or a Personal Insolvency Arrangement to a person to be held in trust for the benefit of creditors (i.e. personal insolvency practitioner) will not trigger a clawback of capital allowances and, where rental income arises in respect of the property while it is held by the practitioner, the debtor will remain liable to income tax in respect of that rental income.

Secondly, the transfer of assets to a personal insolvency practitioner will not be liable to capital gains tax. However, the practitioner will be liable to capital gains tax on the subsequent disposal of the asset.

Thirdly, any benefit arising from the write-off or reduction of debt under a Debt Relief Notice, Debt Settlement Arrangement or Personal Insolvency Arrangement will not be a gift or inheritance for CAT purposes.

Finally, any Debt Settlement Arrangement or Personal Insolvency Arrangement will provide for payment of current tax liabilities of the debtor and for the payment of any tax liabilities of the personal insolvency practitioner during the course of such arrangements.

Remittance basis of taxation (RBT)RBT provides favourable taxation treatment for Irish tax resident, non-Irish domiciled

individuals in respect of foreign investment income (e.g. rental) and foreign source employment income relating to overseas duties. RBT is not available in relation to earnings from a foreign employment exercised in Ireland. Such earnings are liable to PAYE, subject to certain exclusions. Where RBT applies, the amount of foreign income taxable in Ireland is limited to the amount remitted to Ireland. Where an individual subject to RBT transfers foreign source income (or property bought using that income) to their spouse or civil partner and that income or property is remitted to Ireland, the remittance will be deemed to have been made by the individual.

Capital gains arising on the disposal of non-Irish assets by non-Irish domiciled individuals are liable to Irish capital gains tax only to the extent that the gain is remitted to Ireland.

The table below summarises the position:

Domicile levyA domicile levy of up to €200,000 applies to individuals who are Irish domiciled irrespective of their tax residence position and whether or not they hold Irish citizenship. Liability to the levy depends on the level of worldwide income and the value of Irish-located property.

The domicile levy must be paid on a self-assessment basis and any Irish income tax paid will be allowed as a credit against the levy. Individuals liable to the levy must file a

return and pay the appropriate levy by 31 October following the year end.

Special assignment relief programme (SARP)A special expatriate assignment relief programme applies to certain employees assigned to Ireland to work for a period of at least one year. The relief was first introduced in 2009. A new enhanced scheme was introduced for individuals arriving in Ireland from 2012. Further amendments were introduced to this enhanced scheme with

Income tax


Secondly, the transfer of assets to a personal insolvency practitioner is not liable to capital gains tax. However, the practitioner will be liable to capital gains tax on the subsequent disposal of the asset.

Thirdly, any benefit arising from the write-off or reduction of debt under a Debt Relief Notice, Debt Settlement Arrangement or Personal Insolvency Arrangement is not a gift or inheritance for CAT purposes.

Finally, a Debt Settlement Arrangement or Personal Insolvency Arrangement provides for payment of current tax liabilities of the debtor and for the payment of any tax liabilities of the personal insolvency practitioner during the course of such arrangements.

Remittance Basis of Taxation (RBT)RBT provides favourable taxation treatment for Irish tax resident, non-Irish domiciled individuals

in respect of foreign investment income (e.g. rental) and foreign source employment income relating to overseas duties. RBT is not available in relation to earnings from a foreign employment exercised in Ireland. Such earnings are liable to PAYE, subject to certain exclusions. Where RBT applies, the amount of foreign income taxable in Ireland is limited to the amount remitted to Ireland. Where an individual subject to RBT transfers foreign source income (or property bought using that income) to their spouse or civil partner and that income or property is remitted to Ireland, the remittance will be deemed to have been made by the individual.

Capital gains arising on the disposal of non-Irish assets by non-Irish domiciled individuals are liable to Irish capital gains tax only to the extent that the gain is remitted to Ireland.

The table below summarises the position.

Resident, non-Irish domiciled Income/gains taxable in Ireland

Irish source income yes

Foreign employment – Irish workdays yes

Foreign employment – non-Irish workdays only if remitted

Foreign investment income (eg rental income) only if remitted

Irish capital gains yes

Foreign capital gains only if remitted

Income tax

Maternity BenefitSince 1 July 2013, maternity benefit, adoptive benefit and health and safety benefit are treated as taxable income and taxed under Schedule E as employment income. They remain exempt from PRSI and Universal Social Charge (USC).

Alimony/Maintenance PaymentsIn general, for payments under legally enforceable maintenance agreements, income tax is not deducted at source and the payer deducts the payments in computing total income for the tax year. The payments are assessed for income tax purposes as the recipient’s income. Payments for the benefit of a child are made without deduction of tax at source and do not reduce the total income of the payer for income tax purposes. Separated/divorced spouses and civil partners are treated for tax purposes as single persons.

Personal InsolvencyA number of changes to the law were made in 2013 in order to facilitate the personal insolvency legislation that was introduced in 2012.

Firstly, the transfer of property under a Debt Settlement Arrangement or a Personal Insolvency Arrangement to a person to be held in trust for the benefit of creditors (i.e. personal insolvency practitioner) does not trigger a clawback of capital allowances and, where rental income arises in respect of the property while it is held by the practitioner, the debtor remains liable to income tax in respect of that rental income.

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Income tax

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Income tax

37Tax Facts 2017

effect from 1 January 2015 which are designed to increase the take-up levels of SARP.

The relief is available for a maximum of five consecutive tax years both to Irish domiciled and certain non-Irish domiciled individuals who are required by their existing employer organisation to come to Ireland between 2012 and 2017 to work here for a minimum period of 12 months. The individual can be engaged under an Irish or non-Irish employment contract.

Qualifying individuals will be entitled to exclude 30% of employment earnings over €75,000 from the charge to Irish tax. For the years 2012 to 2014, the maximum income upon which relief may be claimed was €500,000. This upper €500,000 threshold has been removed for 2015 and subsequent years.

In addition, qualifying individuals are entitled to receive tax free payment or reimbursement of the reasonable costs of one return trip to their ‘home’ country and school fees (up to €5,000 per annum) for each child, subject to restrictions. The relief may be claimed up-front by way of a payroll deduction or by way of a repayment after the tax year end. Either way, advance approval by Irish Revenue is required.

SARP conditions for individuals arriving in Ireland from 2012 to 2014

For the years 2012 to 2014, in order to qualify and claim SARP relief the individual must:

• have a ‘base salary’ of at least €75,000;

• be tax resident in Ireland and not resident elsewhere;

• exercise predominantly all but incidental duties of their employment in Ireland during the assignment period;

• have been non-resident in Ireland for the five years immediately preceding the year of arrival; and

• have been employed on a full time basis by a ‘relevant employer’ for the entire 12 months immediately prior to arrival.


For tax years 2015 to 2017, in order to qualify and claim SARP relief the individual must:


• be tax resident in Ireland (the individual may also be resident elsewhere);

• have been non-resident in Ireland for the five years immediately preceding the year of arrival; and

• have been employed on a full-time basis by a ‘relevant employer’ for the entire 6 months immediately prior to arrival.

The relevant employer must have been incorporated and resident in a country with which Ireland has either a double tax treaty or an exchange of information agreement. From 2015, the employer must certify to Irish Revenue within 30 days of the date the

individual arrives in Ireland, that the qualifying conditions have been met.

There are differing conditions in relation to what is included as earnings both for the base salary and the income to which the 30% is applied. Certain other reliefs (e.g. for non-Irish workdays) cannot be claimed in conjunction with SARP relief. The relief also imposes certain reporting obligations on employers.

It should be noted that, while the income is relieved from income tax, it is not relieved from the Universal Social Charge (USC) or PRSI (where applicable).

Note: The ‘old’ SARP regime still applies for employees who arrived in Ireland before 2012.

Cross border workersIncome tax relief is available to individuals who are resident in Ireland but who work outside Ireland. The relief operates in such a way as to effectively exclude from Irish tax the income arising from a qualifying employment. In order to qualify for the relief, the individual must hold an employment outside Ireland for a continuous period of at least 13 weeks in a country with which Ireland has a double tax treaty. Income from the qualifying employment must be fully taxed in that country and the foreign tax paid. The individual must also be present in Ireland for at least one day per week during the period of the qualifying employment.

Income tax


of 12 months. The individual can be engaged under an Irish or non-Irish employment contract.

Qualifying individuals will be entitled to exclude 30% of employment earnings over €75,000 from the charge to Irish income tax. For the years 2012 to 2014, the maximum income upon which relief may be claimed was €500,000. This upper €500,000 threshold was removed for 2015 and subsequent years.

In addition, qualifying individuals are entitled to receive tax free payment or reimbursement of the reasonable costs of one return trip to their ‘home’ country and school fees (up to €5,000 per annum) for each child, subject to restrictions. The relief may be claimed up-front by way of a payroll deduction or by way of a repayment after the tax year end. Either way, advance approval by Irish Revenue is required.


For the years 2012 to 2014, in order to qualify and claim SARP relief the individual must:


• be tax resident in Ireland and not residentelsewhere;

• exercise predominantly all but incidentalduties of their employment in Irelandduring the assignment period;

• have been non-resident in Ireland for thefive years immediately preceding the year ofarrival; and

• have been employed on a full time basis by a‘relevant employer’ for the entire 12 monthsimmediately prior to arrival.


For tax years 2015 to 2020, in order to qualify and claim SARP relief the individual must:


• •be tax resident in Ireland (the individualmay also be resident elsewhere);

• have been non-resident in Ireland for thefive years immediately preceding the year ofarrival; and

• have been employed on a full-time basis bya ‘relevant employer’ for the entire 6 monthsimmediately prior to arrival.

The relevant employer must have been incorporated and resident in a country with which Ireland has either a double tax treaty or an exchange of information agreement. From 2015, the employer must certify to Irish Revenue within 30 days of the date the individual arrives in Ireland, that the qualifying conditions have been met.

There are differing conditions in relation to what is included as earnings both for the base salary and the income to which the 30% is applied. Certain other reliefs (e.g. for non-Irish workdays) cannot be claimed in

Income tax

Domicile LevyA domicile levy of up to €200,000 applies to individuals who are Irish domiciled irrespective of their tax residence position and whether or not they hold Irish citizenship. Liability to the levy depends on the level of worldwide income (relevant if more than €1 million) and the value of Irish-located property (relevant if in excess of €5 million).

The domicile levy must be paid on a self-assessment basis and any Irish income tax paid will be allowed as a credit against the levy. Individuals liable to the levy must file a return and pay the appropriate levy by 31 October following the year end.

Special Assignment Relief Programme (SARP)A special expatriate assignment relief programme applies to certain employees assigned to Ireland to work for a period of at least one year. The relief was first introduced in 2009. A new enhanced scheme was introduced for individuals arriving in Ireland from 2012. Further amendments were introduced to this enhanced scheme with effect from 1 January 2015 which are designed to increase the take-up levels of SARP.

The relief is available for a maximum of five consecutive tax years both to Irish domiciled and certain non-Irish domiciled individuals who are required by their existing employer organisation to come to Ireland between 2012 and 2020 to work here for a minimum period

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Income tax

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Income tax

38Tax Facts 2017

Foreign earnings deduction (FED)FED relief was introduced in 2012 to encourage companies that are expanding into emerging markets. The relief applies to individuals who spend significant amounts of time working in a relevant State.

The relief provides for a reduction in the individual’s employment income (excluding certain benefits in kind but including share based rewards) by apportioning the income by reference to the number of qualifying days worked in a relevant State in the year over the number of days that the employment is held in the year. However, the reduction is capped at €35,000 in any year.

For the years 2012 to 2014, the relief applies to individuals who spent at least 60 days a year working in Brazil, Russia, India, China, and South Africa and from (1 January 2013) Algeria, The Democratic Republic of the Congo, Egypt, Ghana, Kenya, Nigeria, Senegal and Tanzania. For the years 2015 to 2017, the relief has been extended to include Japan, Singapore, South Korea, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Indonesia, Vietnam, Thailand, Chile, Oman, Kuwait, Mexico and Malaysia.

Only periods comprising at least 4 consecutive days working in these locations count towards the 60 day threshold for the years 2012 to 2014. From 2015, the 60 day threshold has been reduced to 40 days and only 3 consecutive days working in these locations is required to count towards the 40 day threshold. Time spent travelling to/from

Ireland or between relevant States will also be deemed to be time spent in a relevant State, which was not previously the case.

Employment & Investment Incentive / Seed Capital SchemeThe Employment Investment Incentive (EII) is a tax relief incentive scheme that provides tax relief for investment in certain corporate trades. The scheme allows an individual investor to obtain income tax relief on investments up to a maximum of €150,000 per annum in each tax year up to 2020. The minimum investment in any one company is €250. Individuals interested in EII can invest directly through a private placement or through a Designated Investment Fund.

Income tax relief is granted in two instalments - the initial, based on 30/40ths of the amount invested, is generally granted in the first year and the balance is deferred until the year of assessment following the later of 4 years after the date the shares were issued or trading commenced. Tax relief in respect of the deferred amount is conditional upon the investee company demonstrating that it has increased employment numbers or research and development expenditure.

This scheme is available to the majority of small and medium-sized trading companies that satisfy certain EU State Aid regulations. An overall limit of €15 million (and €5 million annually) is placed on the amount of the investment raised by a qualifying company which can qualify for relief under the EII.

Income tax


and Pakistan and (2) reducing the minimum required number of days working in a Relevant State from 40 to 30 days per annum.

The relief provides for a reduction in the individual’s employment income (excluding certain benefits in kind but including share based rewards) by apportioning the income by reference to the number of qualifying days worked in a Relevant State in the year over the number of days that the employment is held in the year. However, the reduction is capped at €35,000 in any year.

For the years 2012 to 2014, the relief applies to individuals who spent at least 60 days a year working in Brazil, Russia, India, China, and South Africa and from (1 January 2013) Algeria, The Democratic Republic of the Congo, Egypt, Ghana, Kenya, Nigeria, Senegal and Tanzania. For the years 2015 to 2017, the relief has been extended to include Japan, Singapore, South Korea, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Indonesia, Vietnam, Thailand, Chile, Oman, Kuwait, Mexico and Malaysia. For the years 2017 to 2020, the list of Relevant States also includes Colombia and Pakistan.

For the years 2012 to 2014, only periods comprising at least four consecutive days working in these locations count towards the 60 day threshold. From 2015, the 60 day threshold was reduced to 40 days and only three consecutive days working in these locations was required to count towards the 40 day threshold. From 2015, time spent travelling to/from Ireland or between Relevant States is also deemed to be time

spent in a Relevant State, which was not previously the case. From 2017, the minimum number of days required working abroad has been further reduced to 30 days per annum.

Employment & Investment Incentive / Startup Refunds for Entrepreneurs (SURE)The Employment Investment Incentive (EII) is a tax relief incentive scheme that provides tax relief for investment in certain corporate trades. The scheme allows an individual investor to obtain income tax relief on investments up to a maximum of €150,000 per annum in each tax year up to 2020. The minimum investment in any one company is €250. Individuals interested in EII can invest directly through a private placement or through a Designated Investment Fund.

Income tax relief is granted in two instalments - the initial, based on 30/40ths of the amount invested, is generally granted in the first year and the balance is deferred until the year of assessment following the later of four years after the date the shares were issued or trading commenced. Tax relief in respect of the deferred amount is conditional upon the investee company demonstrating that it has increased employment numbers or research and development expenditure.

This scheme is available to the majority of small and medium-sized trading companies that satisfy certain EU State Aid regulations. An overall limit of €15 million (and €5 million annually) is placed on the amount of the

Income tax

conjunction with SARP relief. The relief also imposes certain reporting obligations on employers.

It should be noted that, while the income is relieved from income tax, it is not relieved from the Universal Social Charge (USC) or PRSI (where applicable).

Cross Border WorkersIncome tax relief is available to individuals who are resident in Ireland but who work outside Ireland. The relief operates in such a way as to effectively exclude from Irish tax the income arising from a qualifying employment. In order to qualify for the relief, the individual must hold an employment outside Ireland for a continuous period of at least 13 weeks in a country with which Ireland has a double tax treaty. Income from the qualifying employment must be fully taxed in that country and the foreign tax paid. The individual must also be present in Ireland for at least one day per week during the period of the qualifying employment.

Foreign Earnings Deduction (FED)FED relief was introduced in 2012 to encourage companies that are expanding into emerging markets. The relief applies to individuals who spend significant amounts of time working in a “Relevant State”. Finance Act 2016 extended the relief until 31 December 2020 and made some enhancements to the relief for FED claims for 2017 and subsequent years by: (1) increasing the list of Relevant States to include Colombia

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Income tax

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Income tax

39Tax Facts 2017

In order to qualify under the scheme, the individual must subscribe on his/her own behalf for shares which:

• represent new ordinary share capital in a qualifying company, and

• carry no preferential rights as to dividends, assets on a winding up or to be redeemed.

Shares must be held for at least four years if the investor wants to retain the full tax relief. Gains realised on the disposal of EII shares are subject to normal capital gains tax rules but losses are not generally allowed due to the availability of income tax relief.

The Seed Capital Scheme (SCS) is a slightly more generous version of the EII that targets individuals who leave PAYE employment to set out own companies. The SCS investor may have been a top rate taxpayer when employed so the scheme is designed to allow him/her elect to shelter income earned during any of the previous 6 years in order to maximise the tax rebate. The maximum investment that can qualify under SCS is €600,000 (€100,000 per annum over 6 years).

R&D tax creditCompanies may surrender a portion of their R&D tax credit to reward key employees who have been involved in the R&D activities of the company, allowing them to effectively receive part of their remuneration tax-free. In order to qualify as a ‘key employee’:

• the employee must not have been a director of the employer company;

• the employee must not have had a material interest in the employer company;

• the employee must perform at least 50% of their duties “in the conception, or creation of new knowledge, products, processes, methods or systems”; and

• at least 50% of the emoluments of the employee must qualify as R&D expenditure.

The effective rate of tax of the employee cannot be reduced below 23% and unused tax credits which the employee has been allocated may be carried forward. The employee may only make a claim to Irish Revenue for a tax refund after the tax year-end.

Relief for mortgage interest paymentsMortgage interest tax relief is no longer available for loans taken out after 31 December 2012. However, tax relief at source is available up to 2017 in respect of qualifying loans taken out on or before 31 December 2012 for residences situated in Ireland. From January 2014, lenders are obliged to grant this tax relief at source (TRS) based on the amount of interest actually paid by the borrower within a tax year. This change will have no impact for borrowers who pay the correct mortgage amount on time, in accordance with the terms of their loan. However, where borrowers do not make payment/s or pay less than the amount of interest charged to their account, the TRS amount due will be reduced to reflect the actual amount paid.

First time buyers

In the case of qualifying first time buyers, tax relief is available on the first €10,000 of interest paid each year (single person). The rate at which tax relief will apply is based on a sliding scale (25% down to 20%) for the first seven years of any qualifying loan but see the exception below regarding properties purchased between 1 January 2004 and 31 December 2008. From year 8, the rates and thresholds for relief are as for non-first time buyers.

Income tax


investment raised by a qualifying company which can qualify for relief under the EII.

In order to qualify under the scheme, the individual must subscribe on his/her own behalf for shares which:

• represent new ordinary share capital in aqualifying company, and

• carry no preferential rights as todividends, assets on a winding up or to beredeemed.

Shares must be held for at least four years if the investor wants to retain the full tax relief. Gains realised on the disposal of EII shares are subject to normal capital gains tax rules but losses are not generally allowed due to the availability of income tax relief.

When first introduced in Finance Act 2011, the EII relief was subject to the High Earner’s Restriction. Finance (No. 2) Act 2013 provided for the removal of the EII, relating to investments in qualifying companies from 15 October 2013 to 31 December 2016, from the list of specified reliefs caught by the High Earners Restriction. Finance Act 2016 extended the exclusion of the EII from the High Earner’s Restriction for subscriptions of eligible shares made on or after 1 January 2017.

The scheme “Startup Refunds for Entrepreneurs” (SURE), formerly known as the “Seed Capital Scheme”, is a slightly more generous version of the EII that targets individuals who leave PAYE employment to set up their own companies. The SURE

investor may have been a top rate taxpayer when employed so the scheme is designed to allow him/her elect to shelter income earned during any of the previous six years in order to maximise the tax rebate. The maximum investment that can qualify under SURE is €700,000 (€100,000 per annum for the previous six tax years and €100,000 in the current year).

R&D Tax CreditCompanies may surrender a portion of their R&D tax credit to reward key employees who have been involved in the R&D activities of the company, allowing them to effectively receive part of their remuneration tax-free. In order to qualify as a ‘key employee’:

• the employee must not have been adirector of the employer company;

• the employee must not have had amaterial interest in the employercompany;

• the employee must perform at least 50%of their duties “in the conception, orcreation of new knowledge, products,processes, methods or systems”; and

• at least 50% of the emoluments of theemployee must qualify as R&Dexpenditure.

The effective rate of tax of the employee cannot be reduced below 23% and unused tax credits which the employee has been allocated may be carried forward. The employee may

only make a claim to Irish Revenue for a tax refund after the tax year-end.

Relief for Mortgage Interest PaymentsMortgage interest tax relief is no longer available for loans taken out after 31 December 2012. However, tax relief at source is available up to 2017 in respect of qualifying loans taken out on or before 31 December 2012 for residences situated in Ireland. From January 2014, lenders are obliged to grant this tax relief at source (TRS) based on the amount of interest actually paid by the borrower within a tax year. This change will have no impact for borrowers who pay the correct mortgage amount on time, in accordance with the terms of their loan. However, where borrowers do not make payment/s or pay less than the amount of interest charged to their account, the TRS amount due will be reduced to reflect the actual amount paid.

First time buyers

In the case of qualifying first time buyers, tax relief is available on the first €10,000 of interest paid each year (single person). The rate at which tax relief will apply is based on a sliding scale (25% down to 20%) for the first seven years of any qualifying loan, but see the exception overleaf regarding properties purchased between 1 January 2004 and 31 December 2008. From year 8, the rates and thresholds for relief are as for non-first time buyers.

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40Tax Facts 2017

Non-first time buyers

For qualifying non-first time buyers tax relief is available on the first €3,000 in interest paid each year (single person). The rate of tax relief is 15%.

Purchasers of properties between 2004 and 2008:

The rate of mortgage interest relief will be increased to 30% for buyers who took out their first mortgage between 2004 and 2008.

The ceilings for tax relieved mortgage interest payments for 2016 are as follows:

Rent relief for private accommodationIn relation to new tenancies, relief for rent paid is no longer available. For individuals who were paying rent in respect of a tenancy on 7 December 2010, relief is still available but will be abolished by 2018. Relief is given by way of a tax credit at 20% on the actual rent paid. The maximum credit available for 2016 is as follows:

Rent a room scheme Income from the letting, as residential accommodation, of a room in a person’s principal private residence is exempt from tax where the gross annual rental income with effect from 1 January 2015 is not greater than €12,000 (previously €10,000).

The relief does not apply where the letting is between connected parties.

Rental incomeNet profit arising from a rental property is taxed at an individual’s marginal rate of tax. Deductions in arriving at net profit include rates, management fees, maintenance, insurance, certain legal and accountancy fees, wear and tear on furniture and fittings and repairs. A deduction is also allowed for interest on money borrowed for the purchase of, or repair to, the property. In the case of a rented residential property, interest relief is restricted to 75% and the tenancy must be registered with the Private Residential Tenancy Board (PRTB). However, Finance Act 2015 introduced measures whereby a 100% interest deduction can be claimed for certain qualifying residential lettings.

In general, a net rental loss can be offset against profit from another property or carried forward against future rental profits. Foreign rental losses can be offset against foreign rental income only.

Restriction of certain tax reliefs for high earnersCertain tax reliefs available to high income earners are restricted. A tapering restriction applies to individuals with income in excess of €125,000 (before claiming the specified tax reliefs) and specified reliefs for the year exceeding €80,000. This results in an effective rate of income tax of 32% where the maximum restriction applies.

Any reliefs not used in a particular tax year are carried forward. In the case of married couples or civil partners, each spouse/civil partner is treated separately when calculating this restriction. As such, each spouse or civil partner can benefit from the threshold of €125,000. Individuals subject to these restrictions are obliged to file and pay via the Irish Revenue’s On-line system (ROS).

Income tax


Non-first time buyers

For qualifying non-first time buyers tax relief is available on the first €3,000 in interest paid each year (single person). The rate of tax relief is 15%.

Purchasers of properties between 2004 and 2008:

The rate of mortgage interest relief will be increased to 30% for buyers who took out their first mortgage between 2004 and 2008.

The ceilings for tax relieved mortgage interest payments for 2017 are as follows:

First time buyers

years 1-7 €

Other

€

Single 10,000 3,000

Married/widowed Civil partnership/ surviving civil partner

20,000 6,000

Rent Relief for Private AccommodationIn relation to new tenancies, relief for rent paid is no longer available. For individuals who were paying rent in respect of a tenancy on 7 December 2010, relief is still available but will be abolished by 2018. Relief is given by way of a tax credit at 20% on the actual rent paid. The maximum credit available for 2017 is as follows:

55 or over

€

Other

€

Single 80 40

Married/widowed Civil partnership/ surviving civil partner

160 80

Rent A Room Scheme Income from the letting, as residential accommodation, of a room in a person’s principal private residence is exempt from tax where the gross annual rental income, with effect from 1 January 2017, is not greater than €14,000 (previously €12,000).

The relief does not apply where the letting is between connected parties.

Rental IncomeNet profit arising from a rental property is taxed at an individual’s marginal rate of tax. Deductions in arriving at net profit include rates, management fees, maintenance, insurance, certain legal and accountancy fees, wear and tear on furniture and fittings and repairs.

A deduction is also allowed for interest on money borrowed for the purchase of, or repair to, the property. In the case of a rented residential property, interest relief is restricted to 75% and the tenancy must be registered with the Residential Tenancy Board (RTB). However, Finance Act 2016 introduced measures to restore full interest deductibility for landlords of residential properties on a

phased basis, starting in 2017. For 2017, the interest deduction has increased from 75% to 80% and the deductible amount will increase by 5% every year thereafter so that for 2021 the 100% interest deduction will be restored for qualifying residential lettings.

In general, a net rental loss can be offset against profit from another property or carried forward against future rental profits. Foreign rental losses can be offset against foreign rental income only.

Help To Buy Incentive (HTB)The HTB Incentive was introduced in Finance Act 2016 with the aim of assisting first-time buyers in attaining the deposit required to buy/self-build a new home by allowing for a refund of income tax and DIRT paid in the prior four tax years. The refund is available up to a maximum of €20,000, subject to certain criteria. In order to claim the refund, the first-time buyer must not have bought a property previously (either individually or jointly) and, where more than one individual is involved, all parties must be first-time buyers.

The incentive applies to a first-time buyer who buys/self-builds a new residential property between 19 July 2016 and 31 December 2019. The first-time buyer must then live in the property for five years from the date the property is habitable.

To make a claim, the individual must supply Revenue with information regarding the property and mortgage online, and their tax

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41Tax Facts 2017

Living City Initiative The Living City Initiative was introduced in Finance Act 2013 and has been amended and updated in the two subsequent Finance Acts.

Residential Property

The Living City Initiative is a relief for owner-occupiers in relation to expenditure incurred on the conversion or refurbishment of certain residential properties located in defined special regeneration areas. The

qualifying locations will be in Limerick City, Waterford City, Cork, Galway, Dublin and Kilkenny, but the exact detail of the qualifying areas has yet to be announced.

The relief takes the form of a deduction from the individual’s total income for the year in which the expenditure is incurred and the following nine years at a rate of 10% per annum of the relevant conversion/ refurbishment expenditure. If, in any year, the property ceases to be used as the person’s only or main residence, no relief will be available for that year. If the property is sold at any time, there is no clawback of the relief claimed but the relief may not be claimed by a subsequent purchaser.

The relief is limited to owner-occupiers and consequently does not apply to rental properties.

The relief is intended to include regeneration works on any residential buildings built prior to 1915 and now includes single-storey buildings.

Finance Act 2014 introduces measures to ensure that a claim for relief is made electronically. The Act requires that certain information is provided to Revenue with the claim, including details of the aggregate of all qualifying expenditure incurred in respect of the qualifying premises.

Commercial Property

As regards commercial property, relief can be claimed for expenditure incurred on certain

commercial property located in a special regeneration area. The relief is provided in the form of capital allowances for expenditure incurred on the conversion or refurbishment of a qualifying property. The capital allowances are available at a rate of 15% per annum (years 1 – 6) and 10% (year 7). A clawback of capital allowances claimed can arise if the property is disposed of within 7 years.

The relief will apply to expenditure incurred on the conversion/refurbishment of buildings located in a special regeneration area that are in use for the purposes of the retailing of goods.

Broadly, the relief may be claimed by owner-occupiers or landlords but property developers are excluded from claiming the relief. Any relief claimed will be included in the calculation of the high earner’s restriction, where applicable.

There are limits on the amount of qualifying expenditure on which relief can be claimed in relation to commercial premises. These are €1,600,000 in the case of a company and €400,000 in the case of an individual.

Where the expenditure is incurred by two or more persons (companies or individuals), the maximum amount of tax relief available cannot exceed €200,000 in total.

The relief is subject to EU approval and, when effective, will apply for a period of five years. It will also be subject to a system of

Income tax


affairs must be in order for each of the four tax years prior to making the claim.

Home Renovation Incentive (HRI)The HRI was introduced in Finance Act 2013 and provides tax relief by way of an income tax credit of 13.5% of qualifying expenditure for repair, renovation or improvement works carried out by a qualifying contractor on a main home or rental property. The maximum tax credit that can apply per property is €4,050.

For the relief to apply, the work must be carried out between 25 October 2013 and 31 December 2018 for Homeowners, and between 15 October 2014 and 31 December 2018 for Landlords. The scheme was due to expire on 31 December 2016 but was extended in Finance Act 2016 by two years to the end of 2018.

In order to avail of the relief, both Homeowners and Landlords must have met their payment and return filing obligations for Local Property Tax and the Household Charge. Landlords must also be registered with the Residential Tenancies Board (RTB).

Living City Initiative The Living City Initiative was introduced in Finance Act 2013 and has been amended and updated in subsequent Finance Acts. EU approval for the scheme was received so that the provisions are effective from 5 May 2015 to 4 May 2020.

Residential Property

The Living City Initiative is a relief for owner-occupiers and landlords in relation to expenditure incurred on the conversion or refurbishment of certain residential properties located in defined special regeneration areas in the centres of Limerick, Waterford, Cork, Galway, Dublin and Kilkenny. Details of the qualifying areas can be located on the websites of the respective local authorities. The scheme originally provided relief for owner-occupiers only but was extended to provide relief for landlords in Finance Act 2016.

The relief takes the form of a deduction from the individual’s total income for the year in which the expenditure is incurred.

The relief for owner occupiers is given by way of a deduction at 10% per annum over ten years of the qualifying conversion/ refurbishment expenditure (must be at least €5,000). If, in any year, the property ceases to be used as the person’s only or main residence, no relief will be available for that year. If the property is sold at any time, there is no clawback of the relief claimed but the relief may not be claimed by a subsequent purchaser.

From 1 January 2017, the relief has been extended to rented residential properties within the special regeneration areas. The relief for landlords is given by way of an accelerated capital allowance of 15% of qualifying expenditure (must be at least

€5,000) for the first six years, and 10% in the seventh year.

The relief is intended to include regeneration works on any residential buildings built prior to 1915 and now includes single-storey buildings. It is subject to a system of certification by the relevant Local Authority. In the case of a rental property, it must be let as a dwelling on bona fide commercial terms, once the refurbishment/conversion takes place.

Finance Act 2014 introduced measures to ensure that a claim for relief is made electronically. The Act requires that certain information is provided to Revenue with the claim, including details of the aggregate of all qualifying expenditure incurred in respect of the qualifying premises.

Finance Act 2016 clarifies that the qualifying refurbishment/conversion costs must be greater than €5,000. Previously, qualifying expenditure of 10% or more of the property’s market value was needed. The Act also removes the need for the building to have been originally built as a dwelling, as well as removing the cap on the floor size of buildings.

Commercial Property

As regards commercial property, relief can be claimed for expenditure in excess of €5,000 incurred on certain commercial property located in a special regeneration area. The relief is provided in the form of capital allowances for expenditure incurred on the

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42Tax Facts 2017

certification by the relevant Local Authority, details of which have yet to be announced.

Employment of a carerA tax allowance of up to €50,000 for the actual cost of employing a person to care for an incapacitated family member may be claimed at the claimant’s marginal tax rate.

Childminding reliefIncome tax is not payable on the earnings of an individual arising from the taking care of up to three children in the individual’s own home, provided the gross amount received is less than €15,000 a year. If such earnings exceed €15,000 the total amount is taxable. Certain conditions apply.

Self-assessment - payment and returnsIn general, self-assessment applies to all individuals with non-PAYE income in excess of €5,000 and to all directors controlling 15% or more of the share capital of certain companies. The self-assessment system places the onus on the individual to file a return, calculate the tax liability, and pay the relevant tax due. To avoid a surcharge, returns of income for the 2015 tax year must be filed on or before 31 October 2016. Any balance of tax due for the year must also be paid by this date, provided preliminary tax obligations for the year have been met (see below).

To avoid interest charges, preliminary income tax due for 2016 must be paid by 31 October 2016. The tax paid must represent at least 90% of the individual’s estimated liability for 2016 or 100% of the ultimate liability for 2015 (before any Employment and Investment Incentive (EII) relief and relief for investment in films).

Self-assessed taxpayers are also liable to PRSI at 4% on their unearned income (e.g. investment income, rental income). Previously, self-assessed contributors were exempt from making PRSI contributions on such income. Please refer to the “PRSI” section on page 48 for further details.

Certain individuals are obliged to file returns and pay any tax due electronically via the Irish Revenue’s On-line system (ROS), e.g. individuals claiming certain property incentive reliefs, who acquire certain offshore products, or who claim relief for pension contributions (RACs, AVCs), film relief etc.

The Irish Revenue generally announces an extension to mid-November to the ROS return filing and tax payment date for self-assessment income tax customers who both pay and file electronically.

Income tax


conversion or refurbishment of a qualifying property. The capital allowances are available at a rate of 15% per annum (years 1 – 6) and 10% (year 7). A clawback of capital allowances claimed can arise if the property is disposed of within seven years.

The relief will apply to expenditure incurred on the conversion/refurbishment of buildings located in a special regeneration area that are in use for the purposes of the retailing of goods.

Broadly, the relief may be claimed by owner-occupiers or landlords but property developers are excluded from claiming the relief. Any relief claimed will be included in the calculation of the high earner’s restriction, where applicable.

There are limits on the amount of qualifying expenditure on which relief can be claimed in relation to commercial premises. These are €1,600,000 in the case of a company trading from the premises, or €800,000 if the investor is a company letting the premises, and €400,000 in the case of an individual.

Special apportionment rules apply where individuals and companies incur qualifying expenditure on a joint basis on the same building. The application of these rules effectively caps the value of the relief at €200,000 for an individual project.

High Earner’s Restriction Certain tax reliefs available to high income earners are restricted. A tapering restriction applies to individuals with income in excess of €125,000 (before claiming the specified tax

reliefs) and specified reliefs for the year exceeding €80,000. This results in an effective rate of income tax of 32% where the maximum restriction applies.

Any reliefs not used in a particular tax year are carried forward. In the case of married couples or civil partners, each spouse/civil partner is treated separately when calculating this restriction. As such, each spouse or civil partner can benefit from the threshold of €125,000. Individuals subject to these restrictions are obliged to file and pay via the Irish Revenue’s On-line Service (ROS).

Employment of a CarerA tax deduction of up to €75,000 for the actual cost of employing a person to care for an incapacitated family member may be claimed at the claimant’s marginal tax rate. The maximum deduction was previously €50,000 for tax years up to and including 2014.

Childcare Services ReliefIncome tax is not payable on the earnings of an individual arising from the taking care of up to three children in the individual’s own home, provided the gross amount received is less than €15,000 a year. If such earnings exceed €15,000 the total amount is taxable. Certain conditions apply.

Self-Assessment - Payment and ReturnsIn general, self-assessment applies to all individuals with non-PAYE income in excess of €5,000 and to all directors controlling 15%

or more of the share capital of certain companies. The self-assessment system places the onus on the individual to file a return, calculate the tax liability, and pay the relevant tax due. To avoid a surcharge, returns of income for the 2016 tax year must be filed on or before 31 October 2017. Any balance of tax due for the year must also be paid by this date, provided preliminary tax obligations for the year have been met (see below).

To avoid interest charges, preliminary income tax due for 2017 must be paid by 31 October 2017 The tax paid must represent at least 90% of the individual’s estimated liability for 2017 or 100% of the ultimate liability for 2016 (before any Employment and Investment Incentive (EII) relief).

Self-assessed taxpayers are also liable to PRSI at 4% on their unearned income (e.g. investment income, rental income). Previously, self-assessed contributors were exempt from making PRSI contributions on such income. Please refer to the “PRSI” section on page 49 for further details.

Certain individuals are obliged to file returns and pay any tax due electronically via the Irish Revenue’s On-Line Service (ROS), e.g. individuals claiming certain property incentive reliefs, who acquire certain offshore products, or who claim relief for pension contributions (RACs, AVCs), etc.

Irish Revenue generally announces an extension to mid-November to the ROS return filing and tax payment date for self-assessment income tax customers who both pay and file electronically.

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43Tax Facts 2017

Termination paymentsPayments made in connection with the termination of an employment, on retirement or on removal, may qualify for one of the following tax exemptions (the highest exemption usually applies):

• Basic Exemption - €10,160 with an additional €765 for each complete year of service. Generally applicable where an employee’s length of service is short.

• Increased Exemption - the basic exemption may be increased by up to €10,000. The additional amount is reduced Euro for Euro by the net present value of any future tax free lump sum entitlement from an occupational pension scheme. No reduction applies where the individual irrevocably waives their right to the pension lump sum. It cannot be claimed if an exemption other than the Basic Exemption has been used by the individual in the previous ten tax years. Prior approval by Irish Revenue is no longer required, but employers still need to check with the employee that the criteria have been met.

• Standard Capital Superannuation Benefit (SCSB) - generally for those employees with long service/high earnings but dependent on pension choices of employee. It is based on average earnings and length of service and is calculated as follows:

(A x B /15) – C where:

A = average annual taxable remuneration for the last 3 years’ service

B = number of complete years’ service

C = net present value of any future tax free lump sum entitlement from an occupational pension scheme. No reduction applies where the individual irrevocably waives their right to the pension lump sum

The maximum exemption available in respect of termination payments is restricted to a lifetime limit of €200,000. Termination payments in excess of the applicable exemption are subject to tax and the Universal Social Charge (USC) but not PRSI. Termination payments made in connection with the death of an employee or on account of injury to or disability of an employee are also subject to the €200,000 exemption limit.

Special rules apply where two or more termination payments are made by the same or associated employers.

Certain reliefs associated with termination payments have recently been abolished. In particular, Foreign Service Relief was abolished from 27 March 2013 and Top Slicing Relief was abolished from 1 January 2014.

Statutory redundancy payable under the Redundancy Payments Acts 1967-2012 continues to be exempt from tax, USC and PRSI.

Income tax


Contact us:

Pat Mahon Partner t: 353 1 792 6186 e: [email protected]

Frances Smith Senior Manager t: 353 1 792 6141 e: [email protected]

Planning tip!

Your 2016 tax return is due by 31 October 2017. If your total income for 2017 is less than that in 2016 consider basing your preliminary tax payment for 2017 on the estimated 2017 liability.

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44Tax Facts 2017

Benefits-in-kind (BIKs) - generalThe majority of employee benefits are subject to PAYE, PRSI and the Universal Social Charge (USC). The taxable benefit is treated as “notional pay” from which PAYE, PRSI and USC are deducted.

BIK on company cars - general rulesThe BIK charge applying to company cars is payable under the PAYE system. The cash equivalent of the private use of a company car is calculated at 30% of the original market value (OMV) with a reduction for business travel over 24,000km.

A further reduction is available on a euro for euro basis for any amount made good by an employee directly to the employer in respect of the cost of providing or running the car.

Where an employee is required to work abroad for an extended period, the notional pay is reduced by reference to the number of days spent working abroad. This is conditional on the employee travelling abroad without the car and the car not being available for use by family or household members.

There is a 20% relief from notional pay on cars for employees whose annual business travel exceeds 8,000km, who spend 70% or more of their time away from their place of work on business and who do not avail of the tapering relief for high business travel.

BIK on preferential loansIn calculating the BIK charge in respect of preferential loans from employers, the specified rates applicable for 2016 are 4% (home loans) and 13.5% (other loans). The BIK charge arises on the difference between the interest on the loan at the specified rate and the interest actually paid on the loan for the year.

BIK on professional subscriptionsThe BIK statutory exemption for professional subscriptions was removed from 2011. The taxable benefit is treated as “notional pay” from which PAYE, PRSI and the USC are deducted. There are certain limited exceptions where no BIK will arise, including where there is a statutory requirement for membership of a professional body.

BIK on travel passes and small benefitsThe following benefits are exempt from income tax:

• the provision of new bicycles and/or related safety equipment to employees up to a cost of €1,000, provided the bicycle is used for travel between home and the normal place of work or travel between work places. The exemption can only be claimed once in a five year period. If certain conditions are met, it is possible to provide the benefit by reducing gross salary.

• the provision by an employer of a monthly or annual bus/train/Luas pass for employees. If certain conditions are met, it is possible to provide such travel passes by reducing gross salary.

• with effect from 22 October 2015, the provision by an employer of a voucher or a non-cash benefit to a value not exceeding €500. No more than one such benefit may be given to an employee in a tax year.

Certain other benefits are, by concession, treated as tax exempt. For details of the tax treatment of employer contributions to occupational pension schemes, refer to the section “Pension schemes” on pages 51-55.

Where an individual is obliged to use their private car for business purposes and incurs expenses in relation to the business use of the vehicle (e.g. petrol, insurance, tax) or an individual incurs subsistence expenses when performing their employment duties away from their normal place of work, subject to certain conditions these expenses may be reimbursed by the employer tax-free up to the level of the prevailing civil service rates.

Employee taxation


Termination paymentsPayments made in connection with the termination of an employment, on retirement or on removal, may qualify for one of the following tax exemptions (the highest exemption usually applies):

• Basic Exemption - €10,160 with anadditional €765 for each complete year ofservice. Generally applicable where anemployee’s length of service is short.

• Increased Exemption - the basicexemption may be increased by up to€10,000. The additional amount isreduced Euro for Euro by the net presentvalue of any future tax free lump sumentitlement from an occupational pension scheme. No reduction applies where theindividual irrevocably waives their rightto the pension lump sum. It cannot beclaimed if an exemption other than theBasic Exemption has been used by theindividual in the previous ten tax years.Prior approval by Irish Revenue is nolonger required, but employers still needto check with the employee that thecriteria have been met.

• Standard Capital Superannuation Benefit(SCSB) - generally for those employeeswith long service/high earnings butdependent on pension choices ofemployee. It is based on average earningsand length of service and is calculated asfollows:

(A x B /15) – C where:

A = average annual taxable remuneration for the last 3 years’ service

B = number of complete years’ service

C = net present value of any future tax free lump sum entitlement from an occupational pension scheme. No reduction applies where the individual irrevocably waives their right to the pension lump sum

The maximum exemption available in respect of termination payments is restricted to a lifetime limit of €200,000. Termination payments in excess of the applicable exemption are subject to tax and the Universal Social Charge (USC) but not PRSI. Termination payments made in connection with the death of an employee or on account of injury to or disability of an employee are also subject to a €200,000 exemption limit.

Special rules apply where two or more termination payments are made by the same or associated employers.

Certain reliefs associated with termination payments have recently been abolished. In particular, Foreign Service Relief was abolished from 27 March 2013 and Top Slicing Relief was abolished from 1 January 2014.

Statutory redundancy payable under the Redundancy Payments Acts 1967-2012 continues to be exempt from tax, USC and PRSI.

Planning tip!

Ensure you know what counts as service for statutory redundancy, tax exemptions and ex-gratia purposes.

Employee taxation

For more information Contact:

Mary O’Hara Partner t: 353 1 792 6215 e: [email protected]

Sean Walsh Senior Manager t: 353 1 792 6543 e: [email protected]

Employee taxation

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Employee taxation

45Tax Facts 2017

The following travel and subsistence rates may be paid tax-free for genuine business travel in Ireland subject to certain limits and conditions. (Alternative rates apply in respect of time spent working abroad. The rates are dependent on work location and other factors).

Motor travel rates

Subsistence rates - within Ireland

Travel and subsistence expenses for Non-Executive Directors (NEDs)From 1 January 2016, non-resident NEDs are exempt from income tax, USC and PRSI on vouched travel and subsistence costs incurred for the purposes of attending board meetings in Ireland.

Employee taxation


Benefits-in-kind (BIKs) - generalThe majority of employee benefits are subject to PAYE, PRSI and the Universal Social Charge (USC). The taxable benefit is treated as “notional pay” from which PAYE, PRSI and USC are deducted.

BIK on company cars - general rulesThe BIK charge applying to company cars is payable under the PAYE system. The cash equivalent of the private use of a company car is calculated at 30% of the original market value (OMV) with a reduction for business travel over 24,000km.

A further reduction is available on a euro for euro basis for any amount made good by an employee directly to the employer in respect of the cost of providing or running the car.

Where an employee is required to work abroad for an extended period, the notional pay is reduced by reference to the number of days spent working abroad. This is conditional on the employee travelling abroad without the car and the car not being available for use by family or household members.

There is a 20% relief from notional pay on cars for employees whose annual business travel exceeds 8,000km, who spend 70% or more of their time away from their place of work on business and who do not avail of the tapering relief for high business travel.

BIK on preferential loansIn calculating the BIK charge in respect of preferential loans from employers, the specified rates applicable for 2016 are 4% (home loans) and 13.5% (other loans). The BIK charge arises on the difference between the interest on the loan at the specified rate and the interest actually paid on the loan for the year.

BIK on professional subscriptionsThe BIK statutory exemption for professional subscriptions was removed from 2011. The taxable benefit is treated as “notional pay” from which PAYE, PRSI and the USC are deducted. There are certain limited exceptions where no BIK will arise, including where there is a statutory requirement for membership of a professional body.

BIK on travel passes and small benefitsThe following benefits are exempt from income tax:

The following benefits are exempt from income tax:

• the provision of new bicycles and/orrelated safety equipment to employees upto a cost of €1,000, provided the bicycle isused for travel between home and thenormal place of work or travel between

work places. The exemption can only be claimed once in a five year period. If certain conditions are met, it is possible to provide the benefit by reducing gross salary.

• the provision by an employer of a monthlyor annual bus/train/Luas pass foremployees. If certain conditions are met,it is possible to provide such travel passesby reducing gross salary.

• with effect from 22 October 2015, theprovision by an employer of a voucher ora non-cash benefit to a value notexceeding €500. No more than one suchbenefit may be given to an employee in a tax year.

Certain other benefits are, by concession, treated as tax exempt. For details of the tax treatment of employer contributions to occupational pension schemes, refer to the section “Pension schemes” on pages 52-55.

Planning tip!

If employees are contributing to the running costs of the car, consider whether such payments can be structured to reduce the BIK charge.

Employee taxationIndex

Welcome

Business taxation

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Financial Services


Tax treaties


Stamp duty


Interest

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Income tax


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Pension schemes

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Local taxes

Customs and excise

Tax contacts



Introduction

Employee taxation

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

Employee taxation

46Tax Facts 2017

Employee taxation

Unapproved employee share schemes

Unapproved share option schemes

Where an employee receives an unapproved share option, a charge to income tax arises on exercise. Income tax may also arise at grant if the option is at a discount and is capable of being exercised 7 years after the date of grant. The taxable amount on exercise is the excess of the market value of the share over the option price. Income tax, the Universal Social Charge (USC) and employee PRSI must be remitted by the employee along with a Form RTSO1 within 30 days of exercise.

Free or discounted share schemes

Where free or discounted shares are awarded, a tax charge arises for the recipient. The taxable benefit is equal to the fair market value of the shares at the date when beneficial ownership is transferred, less the employee’s purchase price, if any. As a general rule, Restricted Stock Unit (RSU) plans also fall within this category. Employers are obliged to withhold income tax, USC and employee PRSI through the PAYE system when the shares are delivered to employees.

Restricted shares and forfeitable shares

Where share awards are ‘restricted’ such that the individual is precluded from selling the shares for a certain period of time, and certain other conditions are met, the taxable value of the shares can be abated. The prohibition on disposal must be absolute and for genuine

commercial reasons. The permitted abatement is determined by the period of years for which the restriction applies (e.g. 10% for a one-year restriction, 20% for a two-year restriction) up to a maximum 60% abatement for a restriction of greater than five years. The abated market value will also be used when calculating the USC and employee PRSI exposures. Employer withholding of income tax, USC and employee PRSI through the PAYE system is required. If shares are awarded subject to forfeiture and a qualifying forfeiture ultimately occurs, employees may seek tax, USC and PRSI rebates where tax is paid in the year of acquisition.

PRSI position for unapproved share awards and share options

All forms of share based remuneration are now liable to an employee PRSI charge. There is no employer’s PRSI charge on any share

Revenue approved employee share schemes

Approved profit sharing schemes

Employees are exempt from income tax on shares received, up to the value of €12,700 annually, from Revenue approved profit sharing schemes. However, employee PRSI and USC apply on appropriation and must be collected via employer payroll withholding. Significant employer PRSI savings are still available. To avoid an income tax liability, the shares must be held in trust for a total of three years. The profit sharing scheme must be available to all employees on similar terms. A

disposal of shares may give rise to a capital gains tax liability.

Save As You Earn (SAYE) approved share option schemes

Options under a Revenue approved SAYE scheme can be granted at a price discounted by up to 25% of the market value of the share. To fund the exercise of the option, employees must commit to regular monthly savings (maximum €500) from after-tax income, over a period of 36 or 60 months. The SAYE scheme must be open to all employees on similar terms. Subject to certain requirements, options granted under SAYE schemes are not liable to income tax on grant or exercise. However, the gain on exercise is subject to employee PRSI and USC (collected via employer payroll withholding for current employees). Capital gains tax may arise on the sale of the shares.


Travel and subsistenceWhere an individual is obliged to use their private car for business purposes and incurs expenses in relation to the business use of the vehicle (e.g. petrol, insurance, tax) or an individual incurs subsistence expenses when performing their employment duties away from their normal place of work, subject to certain conditions these expenses may be reimbursed by the employer tax-free up to the level of the prevailing civil service rates.

The following travel and subsistence rates may be paid tax-free for genuine business travel in Ireland subject to certain limits and conditions. (Alternative rates apply in respect of time spent working abroad. The rates are dependent on work location and other factors).

Motor travel rates

Official km in a calendar year

Engine capacity up to 1,200cc

(cent)

Engine capacity 1,201cc to 1,500cc

(cent)

Engine capacity over 1,500cc

(cent)

Up to 6,437km 39.12 46.25 59.07

6,438km and over 21.22 23.62 28.46

Subsistence rates - within Ireland

Overnight rates (from 1 July 2015) Day rates (from 1 July 2015)

normal rate reduced rate detention rate 10 hours or more

between 5 & 10 hours

€ 125 € 112.50 € 62.50 € 33.61 € 14.01

Notes: The day rate applies in respect of a continuous absence of 5 hours or more from the employee’s normal place of work, provided the employee is not absent at a place within 8km of home or normal place of work. Advice should be taken before proceeding with any payments.

Travel and subsistence expenses for Non-Executive Directors (NEDs)From 1 January 2016, non-resident NEDs are exempt from income tax, USC and PRSI on vouched travel and subsistence costs incurred for the purposes of attending board meetings in Ireland.

With effect from 1 January 2017, vouched travel and subsistence costs incurred by and Irish resident NED will also be exempt from income tax, USC and PRSI, provided that their income from that office does not exceed €5,000 per annum.

Employee taxation

For more information Contact:

Tara Murray Directort: 353 1 792 5465 e: [email protected]

Colm Waters Senior Manager t: 353 1 792 6531 e: [email protected]

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Employee taxation


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation

PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction

47Tax Facts 2017


mployer reporting requirementsCompanies are required to submit annual returns reporting any unapproved share scheme activity during the year. This information is reportable on Form RSS1. Only the grant, exercise, release and assignment of share options and other similar rights are required to be declared on Form RSS1 and, from 2015, must be filed electronically by employers. The statutory reporting deadline is 31 March following the end of the relevant tax year. Other share awards which are subject to employer payroll withholding (e.g. RSUs, Restricted shares, Forfeitable shares) are not required to be reported on Form RSS1. Withholdings due on such share awards should be remitted with the company’s P30 return for the month in which the shares are delivered. The taxable benefit and associated withholdings should be reported in the company’s annual end-of-year P35 return.

Annual scheme returns are also required for all approved share schemes. The reporting deadline is also 31 March following the end of

the relevant tax year. In the case of approved profit sharing schemes, the trustees also have separate e-filing reporting obligations to meet by 31 October following the end of the tax year.

Tax treatment of loans from employee benefit schemesNew anti-avoidance legislation was introduced in 2013 to counteract tax avoidance schemes where an employer, instead of paying salary or bonus, places funds in an unapproved employee benefit scheme (usually a discretionary trust located outside the State) or other structure from which an employee (including former or future employees or any connected person) receives, on or after 13 February 2013, loans or other assets from the scheme with no tax arising under general or benefit-in-kind income tax provisions. This anti-avoidance legislation is consistent with recently enacted UK legislation intended to combat what is described as “disguised remuneration”.

These new anti-avoidance measures will not apply to schemes that are approved by Irish Revenue such as Approved Profit Sharing Schemes, Employee Share Ownership Trusts or Occupational Pension Schemes. Revenue have also confirmed that these provisions are not intended to impact on the current tax treatment of unapproved share option schemes, restricted shares (clog schemes) or RSUs.



Unapproved employee share schemes

Unapproved share option schemes

Where an employee receives an unapproved share option, a charge to income tax arises on exercise. Income tax may also arise at grant if the option is at a discount and is capable of being exercised 7 years after the date of grant. The taxable amount on exercise is the excess of the market value of the share over the option price. Income tax, the Universal Social Charge (USC) and employee PRSI must be remitted by the employee along with a Form RTSO1 within 30 days of exercise.

Free or discounted share schemes

Where free or discounted shares are awarded, a tax charge arises for the recipient. The taxable benefit is equal to the fair market value of the shares at the date when beneficial ownership is transferred, less the employee’s purchase price, if any. As a general rule, Restricted Stock Unit (RSU) plans also fall within this category. Employers are obliged to withhold income tax, USC and employee PRSI through the PAYE system when the shares are delivered to employees.

Restricted shares and forfeitable shares

Where share awards are ‘restricted’ such that the individual is precluded from selling the shares for a certain period of time, and certain other conditions are met, the taxable value of the shares can be abated. The prohibition on disposal must be absolute and for genuine

commercial reasons. The permitted abatement is determined by the period of years for which the restriction applies (e.g. 10% for a one-year restriction, 20% for a two-year restriction) up to a maximum 60% abatement for a restriction of greater than five years. The abated market value will also be used when calculating the USC and employee PRSI exposures. Employer withholding of income tax, USC and employee PRSI through the PAYE system is required. If shares are awarded subject to forfeiture and a qualifying forfeiture ultimately occurs, employees may seek tax, USC and PRSI rebates where tax is paid in the year of acquisition.

PRSI position for unapproved share awards and share options

All forms of share based remuneration are now liable to an employee PRSI charge. There is no employer’s PRSI charge on any share based remuneration.

Planning tip!

Employer PRSI costs of 10.75% could be saved by remunerating employees with shares in the employer or parent company rather than cash.

Planning tip!

Employees may be entitled to claim a reduction of between 10% and 60% in the taxable value of company shares received if there is an absolute restriction imposed on the sale of the shares and other conditions are met.

Revenue approved employee share schemes

Approved profit sharing schemes

Employees are exempt from income tax on shares received, up to the value of €12,700 annually, from Revenue approved profit sharing schemes. However, employee PRSI and USC apply on appropriation and must be collected via employer payroll withholding. Significant employer PRSI savings are still available. To avoid an income tax liability, the shares must be held in trust for a total of three years. The profit sharing scheme must be available to all employees on similar terms. A disposal of shares may give rise to a capital gains tax liability.

Save As You Earn (SAYE) approved share option schemes

Options under a Revenue approved SAYE scheme can be granted at a price discounted by up to 25% of the market value of the share. To fund the exercise of the option, employees must commit to regular monthly savings (maximum €500) from after-tax income, over a period of 36 or 60 months. The SAYE scheme must be open to all employees on similar terms. Subject to certain requirements, options granted under SAYE schemes are not liable to income tax on grant or exercise. However, the gain on exercise is subject to employee PRSI and USC (collected via employer payroll withholding for current employees). Capital gains tax may arise on the sale of the shares.


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation

PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation

PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts



Introduction


48Tax Facts 2017

Rates

Employee/Employer PRSI (Class A)PRSI is charged on employment earnings including most benefits. Employees (known as “employed contributors” in PRSI legislation) who earn less than €352 in any week are not required to pay employee PRSI in that week, however employer PRSI is still due. The weekly PRSI exemption of €127 was abolished with effect from 1 January 2013.

From 1 January 2014, employed contributors who are also self-assessed taxpayers are liable to PRSI on unearned income (e.g. rental profits). Previously, employed contributors were exempt from making PRSI contributions on such income. This change applies to employees with significant amounts of non-employment income (generally more than €5,000 per year) who, for this reason, are required to submit an annual Form 11 self-assessment tax return. Such unearned income is liable to PRSI under Class K at 4%.

Certain taxable lump sum payments made to employees on leaving an employment (including redundancy and ex-gratia) are not liable to PRSI. However, the Universal Social Charge (USC) may still need to be applied to any taxable element of such payments. Most employed persons are liable to PRSI at Class A; however, other classes may apply in certain circumstances (e.g. certain public sector employments or employees aged over 66).

All share awards, share options and Revenue approved share schemes (APSS / SAYE) are

liable to employee PRSI. Share-based remuneration is generally exempt from employer PRSI but liable to USC. No deduction is available in calculating either employer or employee PRSI contributions in respect of payments made by employees to pensions.

Self-employed PRSI (Class S)Self-employed persons are liable for PRSI contributions in respect of income from a trade or profession or from investment income. The contributions are payable on income net of capital allowances. The minimum contribution payable for 2016 is €500. Payment must be included with preliminary tax, which is payable on or before 31 O




Planning tip!

Shares delivered through a correctly structured and Revenue-approved share scheme (e.g. APSS and SAYE) are exempt from income tax (up to 40% saving) and employer PRSI (10.75% saving).

Employer reporting requirementsCompanies are required to submit annual returns reporting any unapproved share scheme activity during the year. This information is reportable on Form RSS1. Only the grant, exercise, release and assignment of share options and other similar rights are required to be declared on Form RSS1 and, from 2015, must be filed electronically by employers. The statutory reporting deadline is 31 March following the end of the relevant tax year. Other share awards which are subject to employer payroll withholding (e.g. RSUs, Restricted shares, Forfeitable shares) are not required to be reported on Form RSS1. Withholdings due on such share awards should be remitted with the company’s P30 return for the month in which the shares are delivered. The taxable benefit and associated withholdings should be reported in the company’s annual end-of-year P35 return and, from 2017 onwards, must be separately disclosed in that return.

Tax treatment of loans from employee benefit schemesNew anti-avoidance legislation was introduced in 2013 to counteract tax avoidance schemes where an employer, instead of paying salary or bonus, places funds in an unapproved employee benefit scheme (usually a discretionary trust located outside the State) or other structure from which an employee (including former or future employees or any connected person) receives, on or after 13 February 2013, loans or other assets from the scheme with no tax arising under general or benefit-in-kind income tax provisions. This anti-avoidance legislation is consistent with recently enacted UK legislation intended to combat what is described as “disguised remuneration”.

These new anti-avoidance measures will not apply to schemes that are approved by Irish Revenue such as Approved Profit Sharing Schemes, Employee Share Ownership Trusts or Occupational Pension Schemes. Revenue have also confirmed that these provisions are not intended to impact on the current tax treatment of unapproved share option schemes, restricted shares (clog schemes) or RSUs.

Contact us:

Pat Mahon Partner T: 353 1 792 6186 e: [email protected]

Liam Doyle Director t: 353 1 792 8638 e: [email protected]

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation

PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction


Annual scheme returns are also required for all approved share schemes. The reporting deadline is also 31 March following the end of the relevant tax year. In the case of approved profit sharing schemes, the trustees also have separate e-filing reporting obligations to meet by 31 October following the end of the tax year.

PRSI

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Introduction

49Tax Facts 2017

PRSI classification of working directors

Before 1 July 2013, the PRSI status of working directors was decided on a case-by-case basis under general employed v self-employed principles, including the guidelines outlined in the Code of Practice for Determining the Employment or Self-employment Status of Individuals.

From 1 July 2013, proprietary directors who own or control 50% or more of the shareholding of the company, either directly or indirectly, are considered self-employed contributors and are liable to pay PRSI at Class S on income from the company. Interestingly, the Act also provides that such directors are also insurable under Class S in respect of duties carried out in the period before 1 July 2013. However, should a working director believe that Class S should not apply before this date, then formal confirmation must be obtained from the Department of Social Protection.

The PRSI class of individuals who own or control less than 50% of the shareholding of the company will continue to be determined under general principles.

The above rules do not apply to the PRSI classification of non-executive directors. In the absence of an employment contract, fees paid to such directors will generally be subject to Class S contributions.

PRSI


Rates

Earnings Employer Employee

Class A - most employed persons

€38 - €352 inclusive per week

€352.01 - €424 per week

€424.01 per week or more

8.5%

8.5%

10.75%

Nil

4%*

4%

Class S - self-employed people, including certain company directors N/a 4%

*Subject to PRSI Credit.

Employee/Employer PRSI (Class A)PRSI is charged on employment earnings including most benefits. Employees (known as “employed contributors” in PRSI legislation) who earn less than €352 in any week are not required to pay employee PRSI in that week, however employer PRSI is still due. Where the employee’s weekly earnings are between €352.01 and €424, the 4% employee PRSI charge is reduced by a tapered PRSI credit up to a maximum of €12 per week.

Employed contributors who are also self-assessed taxpayers are liable to PRSI on unearned income (e.g. rental profits). Previously, employed contributors were exempt from making PRSI contributions on such income. This change applies to employees with significant amounts of non-employment income (generally more than €5,000 per year) who, for this reason, are required to submit an annual Form 11 self-assessment tax return. Such unearned income is liable to PRSI under Class K at 4%.

Certain taxable lump sum payments made to employees on leaving an employment (including redundancy and ex-gratia) are not liable to PRSI. However, the Universal Social Charge (USC) may still need to be applied to any taxable element of such payments. Most employed persons are liable to PRSI at Class A; however, other classes may apply in certain circumstances (e.g. certain public sector employments or employees aged over 66).

All share awards, share options and Revenue approved share schemes (APSS / SAYE) are liable to employee PRSI. Share-based remuneration is generally exempt from employer PRSI but liable to USC. No deduction is available in calculating either employer or employee PRSI contributions in respect of payments made by employees to pensions.

Self-employed PRSI (Class S)Self-employed persons are liable for PRSI contributions in respect of income from a trade or profession or from investment income. The contributions are payable on income net of capital allowances. The minimum contribution payable for 2017 is €500. Payment must be included with preliminary tax, which is payable on or before 31 October each year.

Invalidity Pension and Treatment benefit entitlements will be extended to self-employed individuals for the first time during 2017.

Planning tip!

The question of social insurance liability for Irish people working abroad and those coming to Ireland to take up employment should not be overlooked. Careful planning for international assignments can help to reduce or eliminate the often higher cost of social insurance abroad, particularly in mainland Europe. However, the impact in respect of benefits available must also be considered.

Planning tip!

Employer pension contributions qualify for full relief in calculating employee and employer PRSI contributions. This is something that should be considered by employers when deciding on a reward policy for employees.

PRSI

PRSI

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Introduction

PRSI

50Tax Facts 2017

The Universal Social Charge (USC)The USC is payable on gross income after relief for certain trading losses and capital allowances, but before relief for pension contributions.

PRSI


PRSI classification of working directorsBefore 1 July 2013, the PRSI status of working directors was decided on a case-by-case basis under general employed v self-employed principles, including the guidelines outlined in the Code of Practice for Determining the Employment or Self-employment Status of Individuals.

From 1 July 2013, proprietary directors who own or control 50% or more of the shareholding of the company, either directly or indirectly, are considered self-employed contributors and are liable to pay PRSI at Class S on income from the company. Interestingly, the Act also provides that such directors are also insurable under Class S in respect of duties carried out in the period before 1 July 2013. However, should a working director believe that Class S should not apply before this date, then formal confirmation must be obtained from the Department of Social Protection.

The PRSI class of individuals who own or control less than 50% of the shareholding of the company will continue to be determined under general principles.

The above rules do not apply to the PRSI classification of non-executive directors. In the absence of an employment contract, fees paid to such directors will generally be subject to Class S contributions.

PRSIIndex

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51Tax Facts 2017

Certain rules apply throughout the pensions cycle. These are summarised below as follows:

• Pension contribution rules - the amount of pension contributions that can be made by individuals and employers

• Pension accumulation rules – the limits on how much pension benefits can be built up in a tax efficient manner for an individual

• Pension distribution rules - the options that are available at retirement and their tax treatment

Pension contribution rules - for employersEmployers qualify for tax relief when they make pension contributions to approved pension plans on behalf of their employees. Employees, on their part, are exempt from Income Tax, PRSI and Universal Social Charge (USC) where those employer contributions are made to an occupational pension scheme. Previously, a liability to USC arose where the employer made pension contributions on behalf of employees to a Personal Retirement Savings Account (PRSA). The USC liability no longer applies in respect of employer contributions on or after 1 January 2016.

For occupational pension schemes, there is no specific monetary limit on the amount of employer pension contributions that can be made but overall pension benefits at retirement must fall within certain limits set by Irish Revenue (see below regarding ’pension distribution rules’).

For PRSA plans (see below) an unrelieved benefit-in-kind charge arises on the excess where employer contributions to the PRSA (when combined with the employees’) exceed the age related contribution limits outlined below. The unrelieved contribution can be carried forward and relieved in future years subject to the age related contribution limits.

Pension contribution rules - for individuals, the earnings limitsThere are tax rules and limits regarding personal contributions made to approved pension plans. These limits apply to employees who pay towards occupational pension schemes or Additional Voluntary Contribution (AVC) arrangements. The rules also apply where individuals contribute to Retirement Annuity Contracts (RACs) and where individuals and their employers both pay into a Personal Retirement Savings Account (PRSA):

• individuals can make pension contributions based on their annual earnings (employment or self-employed income) subject to a maximum annual earnings limit of €115,000

• personal contributions to a pension plan qualify for tax relief but not for PRSI or USC relief

Pension contribution rules - for individuals, the age related limitsIn addition to the earnings limit of €115,000 above, there is also an age related limit for individual pension contributions to approved

pension plans. The percentage of an individual’s earnings (subject to the upper limit of €115,000 above) that qualifies for tax relief each year is based on age as follows:

ly where both an employer and an individual pay into a PRSA plan for that employee. For certain specified occupations and professions a minimum rate of 30% applies for individuals aged under 50.

Pension accumulation rules – the lifetime pensions limitWhilst there are annual earnings and age related limits for individual pension contributions, (the contribution rules can be more generous where employers make pension contributions to an occupational pension scheme) there is also an overall lifetime pensions limit beyond which pension funds cease to be tax efficient. The rules are broadly as follows:

• the maximum tax relieved pension fund limit from all pension arrangements is €2 million (from 1 January 2014)

• a higher personal fund threshold of up to €2.3m can be agreed with the Revenue (unless a personal fund threshold has been previously agreed with Revenue) where the value of an individual’s pension benefits at 1 January 2014 already exceeded the €2 million limit. Applications for a personal fund threshold should have be made electronically on or before 1 July 2015 via ROS or PAYE Anytime In such cases, only pension benefits above the agreed personal



The Universal Social Charge (USC)The USC is payable on gross income after relief for certain trading losses and capital allowances, but before relief for pension contributions.

2017 Bands Rate 2016 Bands Rate

€0 - €12,012 .5% €0 - €12,012 1%

€12,013 - €18,772 2.5% €12,013 - €18,668 3%

€18,773 to €70,044 5% €18,669 to €70,044 5.5%

€70,045 and above 8% €70,045 and above 8%

€100,000 and above (self-assessed income only)

11% €100,000 and above (self-assessed income only)

11%

Individuals aged over 70 or individuals in possession of a full medical card pay the USC at a maximum 2.5% rate on income above €12,012 provided their ‘aggregate’ income for the year is €60,000 or less. ‘Aggregate income’ does not include payments from the Department of Social Protection. A ‘GP only’ card is not considered to be a full medical card for USC purposes.

Planning tip!

Social welfare payments are not considered reckonable earnings and are exempt from PRSI and the Universal Social Charge. In certain circumstances, there is now the potential for these payments to be made directly to the employer. It is possible with careful planning to reduce both employee and employer PRSI costs in this area where employees continue to be paid while taking certain leave of absence.


Contact us:

Ken O’Brien Director t: 353 1 792 6818 e: [email protected]


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI

Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts



Introduction

Index

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Pension schemes

52Tax Facts 2017

threshold are liable to penal rates of tax- see below

• a 20:1 capitalisation factor is applied for the purposes of valuing Defined Benefit (DB) pensions which have accrued at 1 January 2104. For the portion of DB pensions accrued after 1 January 2014, a range of age-related valuation factors apply ( from 37: 1 for retirement at age 50 and 22:1 at age 70)

• in valuing DB benefits for crystallisations on or after 1 January 2014 the pension is valued before any pension that may be ‘commuted’ in favour of a pension lump sum

• where the aggregate value of all pension funds (which have been crystallised since 7 December 2005) at retirement exceeds the lifetime pensions limit, the excess is chargeable to exit tax at 40% (previously 41% on or before 31 December 2014)

• in addition, the pension payable to the individual, net of the 40% exit tax above, may be further liable to marginal rate income tax etc, leading to penal effective rates of tax of around 70% on funds above the threshold

• for private sector employees and the self-employed, the tax on the pension value that exceeds the limit is generally deducted from a member’s retirement benefits prior to the payment of the net benefits to the individual

• if the pension scheme discharges the tax without reducing member benefits, this will

be treated as a further benefit and a ‘re-grossing’ will be required to calculate the correct tax due

• public service employees can, subject to certain rules, discharge any such taxes by way of a reduced pension lump sum, by a reduced pension over a specified period or by settlement from their own resources

• public sector employees with separate pension arrangements in respect of private sector income can elect to encash their private sector pension, subject to certain conditions, and pay a once-off tax at their marginal tax rate, USC and PRSI on a lump sum withdrawal from their private pension. Encashed private pensions are not counted towards the overall lifetime pensions limit

Pension distribution rules - occupational pension schemes– the maximum pension allowedWhere an employer establishes an occupational pension scheme to provide pension benefits to its employees at retirement, the following is the maximum pension that can be provided:

• a pension of up to 2/3rds of final remuneration provided that the employee has completed at least ten years of service to their normal retirement age. This overall pensions limit applies to defined benefit or defined contribution type pension schemes and is inclusive of all contributions made by both an employer and an employee and any retained benefits (pensions from former employments/self-employments)

Pension schemes


• Certain rules apply throughout the pensionscycle. These are summarised below asfollows:

• Pension contribution rules - the amount ofpension contributions that can be made byindividuals and employers

• Pension accumulation rules – the limits onhow much pension benefits can be built upin a tax efficient manner for an individual

• Pension distribution rules - the options thatare available at retirement and their taxtreatment

Pension contribution rules - for employersEmployers qualify for tax relief when they make pension contributions to approved pension plans on behalf of their employees. Employees, on their part, are exempt from Income Tax, PRSI and Universal Social Charge (USC) where those employer contributions are made to an occupational pension scheme. Previously, a liability to USC arose where the employer made pension contributions on behalf of employees to a Personal Retirement Savings Account (PRSA). The USC liability no longer applies in respect of employer contributions on or after 1 January 2016.

For occupational pension schemes, there is no specific monetary limit on the amount of employer pension contributions that can be made but overall pension benefits at retirement must fall within certain limits set by Irish Revenue (see below regarding ‘pension distribution rules’).

For PRSA plans (see below) an unrelieved benefit-in-kind charge arises on the excess where employer contributions to the PRSA (when combined with the employees’) exceed the age related contribution limits outlined below. The unrelieved contribution can be carried forward and relieved in future years subject to the age related contribution limits.

Pension contribution rules - for individuals, the earnings limitsThere are tax rules and limits regarding personal contributions made to approved pension plans. These limits apply to employees who pay towards occupational pension schemes or Additional Voluntary Contribution (AVC) arrangements. The rules also apply where individuals contribute to Retirement Annuity Contracts (RACs) and where individuals and their employers both pay into a Personal Retirement Savings Account (PRSA):

• individuals can make pension contributionsbased on their annual earnings(employment or self-employed income)subject to a maximum annual earnings limitof €115,000

• personal contributions to a pension planqualify for tax relief but not for PRSI or USCrelief

Pension contribution rules - for individuals, the age related limitsIn addition to the earnings limit of €115,000 above, there is also an age related limit for individual pension contributions to approved

pension plans. The percentage of an individual’s earnings (subject to the upper limit of €115,000 above) that qualifies for tax relief each year is based on age as follows:

Age attained during tax year

Maximum relief

Less than 30 15%

30 but less than 40 20%




60 and over 40%

These are the upper percentage limits that apply where both an employer and an individual pay into a PRSA plan for that employee. For certain specified occupations and professions a minimum rate of 30% applies for individuals aged under 50.

Pension accumulation rules – the lifetime pensions limitWhilst there are annual earnings and age related limits for individual pension contributions, (the contribution rules can be more generous where employers make pension contributions to an occupational pension scheme) there is also an overall lifetime pensions limit beyond which pension funds cease to be tax efficient. The rules are broadly as follows:

• the maximum tax relieved pension fund limit from all pension arrangements is €2

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53Tax Facts 2017

Pension distribution rules – occupational pension schemes – the maximum lump sum allowedOccupational pension schemes generally allow members to opt for the first portion of their pension benefits in the form of a lump sum. The rules are as follows:

Pension lump sum

• a lump sum of up to 1.5 times final remuneration can be taken for members of defined benefit pension schemes and for members of defined contribution schemes who elect for ‘old rules’ (i.e. a lump sum based on salary and service, with the remaining fund being used to buy an annuity for life)

or

• defined contribution members and defined benefit members owning more than 5% of the company that employs them can instead elect for a pension lump sum of up to 25% of the value of the pension fund where they choose Approved Retirement Fund (ARF) options (see below)

Taxable portion of the lump sum

When applying the limits below all pension lump sums (from all revenue approved pension plans) taken since 7 December 2005 are aggregated in determining how the current lump sum is taxed. The amounts are as follows:

• first €200,000 is tax free.

• next €300,000 at the standard rate of income tax ( 20%) but not PRSI or USC. The standard rate income tax (20%) paid under this rule is available as a credit against tax due where pension benefits exceed the lifetime pensions limit (see ‘Pension accumulation rules’ above).

• balance liable to marginal rate income tax, USC and PRSI.

Pension distribution rules- PRSA and personal pensionsThe self-employed (and employees who are not members of an occupational pension plan with their employer) can save for their retirement using a PRSA or a Retirement Annuity Contract (RAC), collectively referred to as personal pension plans. For personal pension plans, there is no specific Revenue maximum pension that can be taken at retirement (as there are with occupational pension schemes where an employee’s salary and service with the employer are relevant). However, the total value of personal pension plans must remain below the lifetime limits referred to above to avoid the penal taxation rates.

For personal pension plans, the lump sum is calculated as 25% of the value of the fund. The taxation of the lump sum and aggregation rules outlined above apply.

Pension distribution rules – Approved Retirement Funds (ARFs)At retirement, and as an alternative to buying a pension/ annuity for life, certain individuals can opt to invest in an ARF. An ARF is a fund that is used by an individual to generate income during retirement. On death, any remaining value in the ARF can be passed on to the individual’s survivors. No tax applies on ARFs transferred to a spouse/ civil partner, but a tax of 30% applies where the ARF unwinds and is left to one’s children (over 21). Different rates of tax apply depending upon the relationship of the beneficiary to the deceased.

ARF rules can be summarised as follows:

• ARF options are available to those with personal pension plans (RAC contracts and PRSA contracts), to AVC holders, to those in defined contribution occupational pension schemes and those in defined benefit occupational pension schemes where they own/control more than 5% of the voting shares of the company that employs them (i.e. proprietary director)

• in the case of buy-out bonds, Revenue has advised that, where the funds have transferred directly from a defined benefits scheme, the individual will need to have been a proprietary director in order to avail the ARF options

• to invest funds in an ARF at retirement, an individual must have at least €12,700 of other annual pension income already in

Pension schemes


million (unless a personal fund threshold has been previously agreed with Revenue). Where the aggregate value of all pension funds (which have been crystallised since 7 December 2005) at retirement exceeds the lifetime pensions limit, the excess is chargeable to exit tax at 40%

• in addition, the pension payable to the individual, net of the 40% exit tax above, may be further liable to marginal rate income tax etc, leading to penal effective rates of tax of around 70% on funds above the threshold

• pension funds are tested against the limit when they are crystallised (i.e. generally speaking at the time of drawdown). For Defined Contribution Schemes it is the value at the time of crystallisation that is used. For Defined Benefit Scheme separate valuation principles are used i.e. the value is determined using capitalization factors

• for private sector employees and theself-employed, the exit tax on the pension value that exceeds the limit is generally deducted from a member’s retirement benefits prior to the payment of the net benefits to the individual

• if the pension scheme discharges the tax without reducing member benefits, this will be treated as a further benefit and a ‘re-grossing’ will be required to calculate the correct tax due

• public service employees can, subject to certain rules, discharge any such taxes by way of a reduced pension lump sum, by a

reduced pension over a specified period or by settlement from their own resources

• public sector employees with separate pension arrangements in respect of private sector income can elect to encash their private sector pension, subject to certain conditions, and pay a once-off tax at their marginal tax rate, USC and PRSI on a lump sum withdrawal from their private pension. Encashed private pensions are not counted towards the overall lifetime pensions limit

Pension distribution rules - occupational pension schemes– the maximum pension allowedWhere an employer establishes an occupational pension scheme to provide pension benefits to its employees at retirement, the following is the maximum pension that can be provided:

• a pension of up to 2/3rds of finalremuneration provided that the employeehas completed at least ten years of service totheir normal retirement age. This overallpensions limit applies to defined benefit ordefined contribution type pension schemesand is inclusive of all contributions made byboth an employer and an employee and anyretained benefits (pensions from formeremployments/self-employments)

Pension distribution rules – occupational pension schemes – the maximum lump sumallowedOccupational pension schemes generally allow members to opt for the first portion of their pension benefits in the form of a lump sum. The rules are as follows:

Pension lump sum

• a lump sum of up to 1.5 times finalremuneration can be taken for members ofdefined benefit pension schemes and formembers of defined contribution schemeswho elect for ‘old rules’ (i.e. a lump sumbased on salary and service, with theremaining fund being used to buy anannuity for life)

or

• defined contribution members and definedbenefit members owning more than 5% ofthe company that employs them can insteadelect for a pension lump sum of up to 25% ofthe value of the pension fund where theychoose Approved Retirement Fund (ARF)options (see below)

Taxable portion of the lump sum

When applying the limits below all pension lump sums (from all revenue approved pension plans) taken since 7 December 2005 are aggregated in determining how the current lump sum is taxed. The amounts are as follows:

• first €200,000 is tax free


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54Tax Facts 2017

payment. If the individual cannot satisfy this minimum income test they must initially invest the first €63,500 of pension funds in an approved minimum retirement fund. Prior to 1 January 2015 the capital could not be accessed until the earlier of reaching age 75, or the annual pension income subsequently exceeds €12,700, or death. From 1 January 2015 holders of AMRFs are permitted to draw up to 4% per annum from the fund

• after satisfying the €12,700 pension income test, or the approved minimum retirement fund test, the balance of funds can be invested in an ARF

• in the ARF (or vested PRSA), tax is payable each year based on a percentage outlined in the table below of the value of the ARF at 30 November each year, with a credit if actual distributions were made during the year

• from 1 January 2015 the following table applies in relation to deemed distribution rules for ARFs and vested PRSAs:

New access rules for Additional Voluntary Contributions (AVCs)For a limited period of 3 years up to 26 March 2016, employees can withdraw up to 30% of their AVCs by way of a once-off refund. The refund will be treated as income in the year of receipt and liable to tax at an individual’s marginal rate (but exempt from USC and PRSI). The refund option will not apply where AVCs had bought ‘notional added years’ in Defined Benefit pension plans nor will it

extend to other personal contributions to pension plans or to contributions made by employers.

Any amount withdrawn under this option is not counted towards the lifetime limit as described above.

Pension schemes


• next €300,000 at the standard rate ofincome tax ( 20%) but not PRSI or USC. Thestandard rate income tax (20%) paid underthis rule is available as a credit against taxdue where pension benefits exceed thelifetime pensions limit (see ‘Pensionaccumulation rules’ above)

• balance liable to marginal rate income tax,USC and PRSI

Pension distribution rules- PRSA and personal pensionsThe self-employed (and employees who are not members of an occupational pension plan with their employer) can save for their retirement using a PRSA or a Retirement Annuity Contract (RAC), collectively referred to as personal pension plans. For personal pension plans, there is no specific Revenue maximum pension that can be taken at retirement (as there are with occupational pension schemes where an employee’s salary and service with the employer are relevant). However, the total value of personal pension plans must remain below the lifetime limits referred to above to avoid the penal taxation rates.

New rules from 25 December 2016 have been introduced requiring that the value of PRSA and RAC contracts are automatically tested against the lifetime limits when a person reaches age 75. Certain transitional rules apply.

For personal pension plans, the lump sum is calculated as 25% of the value of the fund.

The taxation of the lump sum and aggregation rules outlined above apply.

Pension distribution rules – Approved Retirement Funds (ARFs)

At retirement, and as an alternative to buying a pension/ annuity for life, certain individuals can opt to invest in an ARF. An ARF is a fund that is used by an individual to generate income during retirement. On death, any remaining value in the ARF can be passed on to the individual’s survivors. No tax applies on ARFs transferred to a spouse/ civil partner, but a tax of 30% applies where the ARF unwinds and is left to one’s children (over 21). Different rates of tax apply depending upon the relationship of the beneficiary to the deceased.

ARF rules can be summarised as follows:

• ARF options are available to those withpersonal pension plans (RAC contracts andPRSA contracts), to AVC holders, to those indefined contribution occupational pension schemes and those in defined benefitoccupational pension schemes where theyown/control more than 5% of the votingshares of the company that employs them(i.e. proprietary director)

• in the case of buy-out bonds, Revenue haveadvised that, where the funds havetransferred directly from a defined benefitsscheme, the individual can now avail of theARF options irrespective of whether theywere a proprietary director or not

• to invest funds in an ARF at retirement, anindividual must have at least €12,700 ofother annual pension income already inpayment. If the individual cannot satisfythis minimum income test they mustinitially invest the first €63,500 of pensionfunds in an approved minimum retirementfund. From 1 January 2015 holders ofAMRFs are permitted to draw up to amaximum of 4% per annum from the fund.The AMRF becomes subject to the ARFdrawdown rules on the earlier of reachingage 75, death or meeting the €12,700annual pension income test

• after satisfying the €12,700 pensionincome test, or the approved minimumretirement fund test, the balance of fundscan be invested in an ARF

• in the ARF (or vested PRSA), tax is payableunder the PAYE system based on theamount of the distributions taken from theARF. There is a minimum distributionrequirement from the ARF outlined in thetable below. The minimum distributionsare based on the value of the ARF at 30November each year, with a credit for anyactual distributions that were made duringthe year

• from 1 January 2015 the table below appliesin relation to minimum distribution rulesfor ARFs and vested PRSAs:


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55Tax Facts 2017

Pension schemes


Age for whole of tax year Where the value of all ARFs is under €2m

Deemed distribution %

Where the value of all ARFs is over €2m

Deemed distribution %

Aged under 61 0% 0%

Aged 61 to 70 4% 6%

Aged 70 and over 5% 6%

Limited access rules for Additional Voluntary Contributions (AVCs)Was available for a limited period of 3 years up to 26 March 2016 and is now expired.

Pension schemes

Contact us:

Munro O’Dwyer, Partner Corporate Pensions t: 353 1 792 8708 e: [email protected]

Roger Murphy, Senior Manager Personal Pensions t: 353 1 792 6527 e: [email protected]

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56Tax Facts 2017

Individuals resident or ordinarily resident in Ireland are liable to capital gains tax (“CGT”) on gains from worldwide disposals. Individuals resident or ordinarily resident, but not domiciled, in Ireland are liable on gains arising on the disposal of assets situated in Ireland and on all other foreign gains to the extent that those gains are remitted to Ireland. Individuals neither resident nor ordinarily resident are liable on gains made on the disposal of certain ‘specified assets’. These include land and buildings situated in Ireland and shares deriving the greater part of their value from such assets.

Irish resident companies are liable to corporation tax in respect of ‘chargeable gains’ arising on worldwide disposals while non-resident companies are liable to CGT in respect of gains arising on disposals of certain ‘specified assets’ which includes, in addition to the above, certain assets used or held for the purposes of an Irish branch trade.

Rates• The CGT rate is 33% (effective from 6 December 2012; previously

30%). Lower rates, 15% for a partnership / individual and 12.5% for a company, may apply in relation to chargeable gains arising on the receipt of a “carried interest”, being a share of profits in certain venture capital funds engaged in research, development or innovation activities.

• In arriving at the chargeable gain on the disposal of an asset that was acquired prior to 31 December 2002, the allowable cost is to be adjusted for inflation based on the consumer price index up to that date. Indexation factors for disposals in 2016 are as follows:

**Note: For all years to 2000/2001 inclusive, a year means a 12 month period commencing on 6 April and ending on the following 5 April.

Capital gains tax


• The CGT rate is 33% (effective from 6 December 2012; previously30%). Lower rates, 15% for a partnership / individual and 12.5% fora company, may apply in relation to chargeable gains arising on thereceipt of a “carried interest”, being a share of profits in certainventure capital funds engaged in research, development orinnovation activities.

• In arriving at the chargeable gain on the disposal of an asset that wasacquired prior to 31 December 2002, the allowable cost is to beadjusted for inflation based on the consumer price index up to thatdate. Indexation factors for disposals in 2017 are as follows:

Year expenditure incurred**

Factor Year expenditure incurred

Factor

1974/75 7.528 1989/90 1.503

1975/76 6.080 1990/91 1.442

1976/77 5.238 1991/92 1.406

1977/78 4.490 1992/93 1.356

1978/79 4.148 1993/94 1.331

1979/80 3.742 1994/95 1.309

1980/81 3.240 1995/96 1.277

1981/82 2.678 1996/97 1.251

1982/83 2.253 1997/98 1.232

1983/84 2.003 1998/99 1.212

1984/85 1.819 1999/00 1.193

1985/86 1.713 2000/01 1.144

1986/87 1.637 2001 1.087

1987/88 1.583 2002 1.049

1988/89 1.553 2003 onwards 1.000

**Note: For all years to 2000/2001 inclusive, a year means a 12 month period commencing on 6 April and ending on the following 5 April.

Capital gains tax

Individuals resident or ordinarily resident in Ireland are liable to capital gains tax (“CGT”) on gains from worldwide disposals. Individuals resident or ordinarily resident, but not domiciled, in Ireland are liable on gains arising on the disposal of assets situated in Ireland and on all other foreign gains (with the exception of gains on certain funds) to the extent that those gains are remitted to Ireland. Individuals neither resident nor ordinarily resident are liable on gains made on the disposal of certain ‘specified assets’. These include land and buildings situated in Ireland and shares deriving the greater part of their value from such assets.

Irish resident companies are liable to corporation tax in respect of ‘chargeable gains’ arising on worldwide disposals while non-resident companies are liable to CGT in respect of gains arising on disposals of certain ‘specified assets’ which includes, in addition to the above, certain assets used or held for the purposes of an Irish branch trade.

Rates

Capital gains tax

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57Tax Facts 2017

LossesLosses in any year are set off against chargeable gains arising in the same year. Unused losses may be carried forward indefinitely. Capital losses cannot generally be carried back. Capital losses arising in relation to disposals to a connected person may only be used to shelter chargeable gains on disposals to that same connected person. Gains on development land may only be offset by losses on development land. Inflation relief may not operate to convert a monetary gain into an allowable loss or to increase a

Exemptions and reliefsThe following are some of the main exemptions and reliefs are available:

• Annual exemption €1,270. For married couples or civil partners the exemption is €1,270 each (non-transferable)

• Transfers between spouses/civil partners are generally treated as disposals on which no gain/loss will arise

• The gain on the disposal of an individual’s principal private residence. Certain restrictions may apply where the residence has development potential, has been used for business purposes and/or where the property was not the individual’s principal private residence for the entire period of ownership

• A proportion of the gain on the disposal of certain property purchased between 7 December 2011 and 31 December 2014. Full CGT relief is available if the property is sold seven years from the date it was acquired. Where the property is held for a period in excess of seven years, the relief is allowed in the proportion that the seven years bears to the total period of ownership.

• The gain on the disposal of a dwelling home occupied rent-free by a dependent relative.

• Entrepreneur Relief – pre 2016. This measure provides a CGT tax credit to individuals who use the proceeds of an asset disposal, made on or after 1 January 2010 and upon which CGT has been paid, to acquire certain chargeable business assets as an “initial risk finance investment” in the

period 1 January 2014 to 31 December 2018. The tax credit, which is available on a subsequent disposal of the chargeable business asset, is the lower of (1) the CGT paid on the original asset disposal (pro-rated where the full proceeds were not reinvested in a qualifying manner) or (2) 50% of the CGT due on the subsequent disposal. Broadly, an “initial risk finance investment” is defined as funding a “qualifying enterprise” by way of equity or investment for the purpose of new business where the funding does not exceed €15 million and is provided in full within six months of the commencement of the new business. “Chargeable business assets” are assets costing not less than €10,000 acquired on or after 1 January 2014 but on or before 31 December 2018 which are either (1) used wholly for the purposes of a new business carried on by a “qualifying enterprise” or (2) new ordinary shares in a “qualifying company” carrying on new business (or a 100% parent of such a company). The individual must own at least 15% of the ordinary share capital and be a full-time working director of the “qualifying company”. The chargeable business asset must be held for more than three years. A “qualifying company” is an unlisted “qualifying enterprise”. A “qualifying enterprise” is one that qualifies as a micro, small or medium-sized enterprise under EU Commission Recommendations (i.e. fewer

Capital gains tax


LossesLosses in any year are set off against chargeable gains arising in the same year. Unused losses may be carried forward indefinitely. Capital losses cannot generally be carried back. Capital losses arising in relation to disposals to a connected person may only be used to shelter chargeable gains on disposals to that same connected person. Gains on development land may only be offset by losses on development land. Inflation relief may not operate to convert a monetary gain into an allowable loss or to increase a monetary loss.

Planning tip!

Review your asset portfolios prior to year end to consider whether any losses can be crystallised in order to mitigate capital gains tax liabilities.

Exemptions and reliefsThe following are some of the main exemptions and reliefs are available:

• Annual exemption €1,270. For marriedcouples or civil partners the exemption is€1,270 each (non-transferable).

• Transfers between spouses/civil partnersare generally treated as disposals on whichno gain/loss will arise.

• The gain on the disposal of an individual’sprincipal private residence. Certainrestrictions may apply where the residencehas development potential, has been usedfor business purposes and/or where theproperty was not the individual’s principalprivate residence for the entire period ofownership.

• A proportion of the gain on the disposal ofcertain property purchased between 7December 2011 and 31 December 2014. FullCGT relief is available if the property is soldseven years from the date it was acquired.Where the property is held for a period inexcess of seven years, the relief is allowed inthe proportion that the seven years bears tothe total period of ownership.

• The gain on the disposal of a dwelling homeoccupied rent-free by a dependent relative.

• Entrepreneur Relief – pre 2016. Thismeasure provides a CGT tax credit toindividuals who use the proceeds of an assetdisposal, made on or after 1 January 2010and upon which CGT has been paid, toacquire certain chargeable business assetsas an “initial risk finance investment” in the

period 1 January 2014 to 31 December 2018. The tax credit, which is available on a subsequent disposal of the chargeable business asset, is the lower of (1) the CGT paid on the original asset disposal (pro-rated where the full proceeds were not reinvested in a qualifying manner) or (2) 50% of the CGT due on the subsequent disposal.

Broadly, an “initial risk finance investment” is defined as funding a “qualifying enterprise” by way of equity or investment for the purpose of new business where the funding does not exceed €15 million and is provided in full within six months of the commencement of the new business.

“Chargeable business assets” are assets costing not less than €10,000 acquired on or after 1 January 2014 but on or before 31 December 2018 which are either (1) used wholly for the purposes of a new business carried on by a “qualifying enterprise” or (2) new ordinary shares in a “qualifyingcompany” carrying on new business (or a100% parent of such a company). Theindividual must own at least 15% of theordinary share capital and be a full-timeworking director of the “qualifyingcompany”. The chargeable business assetmust be held for more than three years.

A “qualifying company” is an unlisted “qualifying enterprise”. A “qualifying enterprise” is one that qualifies as a micro, small or medium-sized enterprise under EU Commission Recommendations (i.e. fewer than 250 employees and either annual

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58Tax Facts 2017

than 250 employees and either annual turnover of less than €50 million or a balance sheet total of less than €43 million). Where the subsequent disposal of the chargeable business asset takes place on or after 1 January 2016, Revised Entrepreneur Relief (outlined below) will instead apply unless the CGT payable is higher under the Revised Entrepreneur Relief than the amount payable under the original Entrepreneur Relief.

• Revised Entrepreneur Relief – Finance Act 2015 provides for a revised entrepreneur relief for individuals applying to disposals of chargeable business assets from 1 January 2016. A new reduced rate of CGT of 20% applies to qualifying disposals up to a lifetime limit of €1 million. A qualifying business for the purposes of the relief exclude businesses which consist of the holding of investments, the holding of development land or the development or letting of land. The assets must have been owned for a continuous period of not less than 3 years in the 5 years immediately prior to their disposal. Where the business is carried on by a private company, an individual holding no less than 5% of the shares in the company may qualify for relief. The individual must have been a director or employee of the company, spending not less than 50% of their working time in the service of the company in a managerial or technical capacity for a continuous period of 3 years in the period of 5 years immediately prior to the disposal.

The relief can also apply to shares in a holding company whose business consists wholly or mainly of holding at least 51% of the shares in one or more companies carrying on a qualifying business (a “qualifying group”). The individual must have been a director or employee as above of one or more members of the qualifying group.

• The gain on sale of Irish government securities. Although no chargeable gain can arise on these assets, any accrued interest income in the consideration may, in certain circumstances, be charged to income tax.

• Disposals of individual works of art which are valued at not less than €31,740 when loaned to an approved gallery or museum for public display for a minimum period of ten years.

• Retirement Relief for an individual aged 55 years or more on disposal of a business or a farm owned for ten years or more (which can also include assets held personally but used in the trade). An individual is not required to retire in order to avail of this relief. Where the disposal is to a child, and the person making the disposal is under 66 years of age, full CGT retirement relief may apply regardless of the consideration received. Where the person making the disposal is 66 years of age or over, the relief is limited to the amount that would apply if the proceeds (or market value in the case of a gift) were capped at €3 million. For the purpose of this exemption, a “child” includes a nephew or niece who has worked in the business substantially on a full-time

basis for the period of five years ending with the disposal, or a child of a deceased child. The relief is limited to proceeds of €750,000 (€500,000 in the case of a person aged 66 years or over) where the disposal is not to a child of the individual. The limits of €3 million and €500,000 respectively did not apply for disposals made prior to 1 January 2014. Retirement relief is extended to disposals of leased farmland where certain conditions are met. Land which has been leased for up to 25 years in total ending with the disposal of that land will now qualify for relief (previously 15 years). In all cases, the person making the disposal must have owned and been farming the land for at least 10 years prior to the first letting. The subsequent disposal must be to a child (including a niece or nephew who farms the land) or to another individual provided the disposal takes place before 31 December 2016 or the land is being dispose of to an individual to whom it was leased for farming purposes and each letting of the land was for a period of at least 5 consecutive years. Land let on a conacre basis will now qualify provided the land is disposed of by 31 December 2016 or is leased before that date for a minimum period of 5 years (and a maximum of 25 years) ending with the disposal.

• CGT exemption on gains arising from the disposal by farmers to active farmers of

Capital gains tax


turnover of less than €50 million or a balance sheet total of less than €43 million).

Where the subsequent disposal of the chargeable business asset takes place on or after 1 January 2016, Revised Entrepreneur Relief (outlined below) will instead apply unless the CGT payable is higher under the Revised Entrepreneur Relief than the amount payable under the original Entrepreneur Relief.

• Revised Entrepreneur Relief – Finance Act2015 provides for a revised entrepreneurrelief for individuals applying to disposals ofchargeable business assets from 1 January2016. A new reduced rate of CGT of 20%applies to qualifying disposals up to alifetime limit of €1 million. With effect from1 January 2017, any gains on disposals willbe subject to a 10% rate up to the lifetimelimit of €1 million.

A qualifying business for the purposes ofthe relief exclude businesses which consistof the holding of investments, the holding ofdevelopment land or the development orletting of land. The assets must have beenowned for a continuous period of not lessthan 3 years in the 5 years immediatelyprior to their disposal. Where the business iscarried on by a private company, anindividual holding no less than 5% of theshares in the company may qualify forrelief. The individual must have been adirector or employee of the company,spending not less than 50% of their workingtime in the service of the company in amanagerial or technical capacity for a

continuous period of 3 years in the period of 5 years immediately prior to the disposal.

The relief can also apply to shares in a holding company whose business consists wholly or mainly of holding at least 51% of the shares in one or more companies carrying on a qualifying business (a “qualifying group”). The individual must have been a director or employee as above of one or more members of the qualifying group.

• The gain on sale of Irish governmentsecurities. Although no chargeable gain canarise on these assets, any accrued interestincome in the consideration may, in certaincircumstances, be charged to income tax.

• Disposals of individual works of art whichare valued at not less than €31,740 whenloaned to an approved gallery or museumfor public display for a minimum period often years.

• Retirement Relief for an individual aged 55years or more on disposal of a business or afarm owned for ten years or more (whichcan also include assets held personally butused in the trade). An individual is notrequired to retire in order to avail of thisrelief. Where the disposal is to a child, andthe person making the disposal is under 66years of age, full CGT retirement relief mayapply regardless of the considerationreceived. Where the person making thedisposal is 66 years of age or over, the reliefis limited to the amount that would apply ifthe proceeds (or market value in the case ofa gift) were capped at €3 million. For the

purpose of this exemption, a “child” includes a nephew or niece who has worked in the business substantially on a full-time basis for the period of five years ending with the disposal, or a child of a deceased child. The relief is limited to proceeds of €750,000 (€500,000 in the case of a person aged 66 years or over) where the disposal is not to a child of the individual. The limits of €3 million and €500,000 respectively did not apply for disposals made prior to 1 January 2014.

Retirement relief is extended to disposals of leased farmland where certain conditions are met. Land which has been leased for up to 25 years in total ending with the disposal of that land will now qualify for relief (previously 15 years). In all cases, the person making the disposal must have owned and been farming the land for at least 10 years prior to the first letting.

The subsequent disposal must be to a child (including a niece or nephew who farms the land) or to another individual provided the disposal takes place before 31 December 2019 or the land is being dispose of to an individual to whom it was leased for farming purposes and each letting of the land was for a period of at least 5 consecutive years.

Land let on a conacre basis will now qualify provided the land is disposed of by 31 December 2019 or is leased before that date for a minimum period of 5 years (and a maximum of 25 years) ending with the disposal.


Welcome

Business taxation

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Financial Services


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Introduction

Capital gains tax

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes


Local taxes

Customs and Excise

Tax contacts



Introduction

Capital gains tax

59Tax Facts 2017

payment entitlements under the “Single Payment Scheme” where those entitlements were fully leased

• CGT relief for farm restructuring where a sale, purchase or exchange of land occurs in the period from 1 January 2013 to 31 December 2016, provided certain conditions are met.

• CGT exemption on gains arising on the transfer of a site of up to 1 acre from a parent to a child provided it is for the construction of the child’s principal private residence and the market value of the site does not exceed €500,000.

• CGT exemption for Irish companies making disposals from qualifying holdings in companies which are tax resident in the EU or countries with which Ireland has concluded a double tax treaty, subject to certain conditions.

Impact of debt write-offFinance (No.2) Act 2013 introduced a restriction on the base cost allowable in calculating the gain/ loss on disposal of a chargeable asset in situations where a loan or part of a loan, relating to the purchase or enhancement of the disposed asset, has been forgiven or written off by the lender. As the investor will not have suffered a real economic burden in respect of the portion of the cost written off, a restriction on the allowable base cost is imposed in these circumstances. Where a release of debt occurs in a subsequent year, in circumstances where a deduction has been taken in a prior year CGT calculation, the amount of the release will, in certain circumstances, be chargeable to CGT in that year. This provision applies to borrowings incurred by the person making the disposal or to borrowings of a connected person. It does not apply to a debt write-off between group companies or to a debt write-off in respect of exempt assets in certain circumstances. The provision will be academic where the investor concerned has plentiful other CGT losses available for offset but may create a real tax cost in other circumstances and should be borne in mind in debt negotiations.

Windfall Gains TaxThe “windfall gains tax” charge of 80% in respect of disposals of development land (where both a rezoning and a disposal took place on or after 30 October 2009) has been abolished. From 1 January 2015, such profits will be taxed at the standard rate of CGT (currently 33%). The restrictions on the use of indexation and the use on non-development losses still apply to disposals of development land – it is only the windfall tax rate that has been abolished.

Capital gains tax


• CGT exemption on gains arising from thedisposal by farmers to active farmers ofpayment entitlements under the “SinglePayment Scheme” where those entitlementswere fully leased.

• CGT relief for farm restructuring where asale, purchase or exchange of land occurs inthe period from 1 January 2013 to 31December 2019, provided certain conditions are met.

• CGT exemption on gains arising on thetransfer of a site of up to 1 acre from aparent to a child provided it is for theconstruction of the child’s principal privateresidence and the market value of the sitedoes not exceed €500,000.

• CGT exemption for Irish companies makingdisposals from qualifying holdings incompanies which are tax resident in the EUor countries with which Ireland hasconcluded a double tax treaty, subject tocertain conditions.

Impact of debt write-offFinance (No.2) Act 2013 introduced a restriction on the base cost allowable in calculating the gain/ loss on disposal of a chargeable asset in situations where a loan or part of a loan, relating to the purchase or enhancement of the disposed asset, has been forgiven or written off by the lender. As the investor will not have suffered a real economic burden in respect of the portion of the cost written off, a restriction on the allowable base cost is imposed in these circumstances. Where a release of debt occurs in a subsequent year, in circumstances where a deduction has been taken in a prior year CGT calculation, the amount of the release will, in certain circumstances, be chargeable to CGT in that year.

This provision applies to borrowings incurred by the person making the disposal or to borrowings of a connected person. It does not apply to a debt write-off between group companies or to a debt write-off in respect of exempt assets in certain circumstances. The provision will be academic where the investor concerned has plentiful other CGT losses available for offset but may create a real tax cost in other circumstances and should be borne in mind in debt negotiations.

Planning tip!

Consider the tax impact of debt write off in any debt negotiations to ensure that all potential tax costs are factored into the discussions.

Windfall Gains TaxThe “windfall gains tax” charge of 80% in respect of disposals of development land (where both a rezoning and a disposal took place on or after 30 October 2009) has been abolished. From 1 January 2015, such profits will be taxed at the standard rate of CGT (currently 33%). The restrictions on the use of indexation and the use on non-development losses still apply to disposals of development land – it is only the windfall tax rate that has been abolished.


Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes


Local taxes

Customs and excise

Tax contacts



Introduction

Capital gains tax

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes


Local taxes

Customs and Excise

Tax contacts



Introduction

Capital gains tax

60Tax Facts 2017

Self-assessment - payment and returns

Individuals

• 15 December 2016 - payment of CGT for disposals made from 1 January 2016 to 30 November 2016.

• 31 January 2017 - payment of CGT for disposals made from 1 December 2016 to 31 December 2016.

• 31 October 2016 - filing of 2015 return of income (including gains). This deadline can be extended if filing online (see page 41).

Companies

• The payment dates for CGT in respect of gains arising to companies from disposals of development land are the same as the CGT payment dates for individuals above.

• For disposals of assets other than development land by companies, the payment and filing deadlines are as set out on page 9.

Capital gains tax


Self-assessment - payment and returns

Individuals

• 15 December 2017 - payment of CGT fordisposals made from 1 January 2017 to 30November 2017.

• 31 January 2018 - payment of CGT fordisposals made from 1 December 2017 to 31December 2017.

• 31 October 2017 - filing of 2016 return ofincome (including gains). This deadline canbe extended if filing online (see page 42).

Companies

• The payment dates for CGT in respect ofgains arising to companies from disposals ofdevelopment land are the same as the CGTpayment dates for individuals above.

• For disposals of assets other thandevelopment land by companies, thepayment and filing deadlines are as set outon page 9.

Capital gains tax

Contact us:

Tim O’Rahilly Partner t: 353 1 792 6862 e: [email protected]

Marie Flynn Director t: 353 1 792 6449 e: marie.flynn @ie.pwc.com

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes


Local taxes

Customs and excise

Tax contacts



Introduction

Capital gains tax

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes


Local taxes

Customs and Excise

Tax contacts



Introduction

Capital gains tax

61Tax Facts 2017

GeneralCapital acquisitions tax (“CAT”) comprises principally gift and inheritance tax. CAT applies in the case of a person becoming beneficially entitled to property, either by way of a gift or on a death, for less than full consideration. The charge to CAT for gifts or inheritances will generally arise where:

• the disponer (the person providing the benefit) is resident or ordinarily resident in Ireland, or

• the beneficiary is resident or ordinarily resident in Ireland, or

• the subject matter of the gift or inheritance is situated in Ireland

Special rules apply to non-domiciled disponers and beneficiaries.

Calculation of CATGifts or inheritances taken on or after 5 December 1991 from disponers within the same group threshold (see below) must be taken into account when calculating CAT. These gifts or inheritances serve to reduce, or cancel out, the amount of the tax free threshold available. From 6 December 2012 amounts in excess of the threshold are taxed at 33% (previously 30%).

There are three categories which are based on the relationship between the disponer and the beneficiary:

Group A

Applies where the beneficiary is a child or minor child of a deceased child of the disponer, or a foster child (subject to certain conditions) of the disponer, or a child of the civil partner of the disponer, or a minor child of a deceased child’s civil partner. This threshold also applies to inheritances taken by a parent from a deceased child, subject to certain exceptions.

Group B

Applies where the beneficiary is a lineal ancestor, lineal descendant (other than a child, or minor child of a deceased child), a brother, sister, or a child of a brother or sister of the disponer, or a child of a civil partner of a brother or sister of the disponer.

Group C

Applies where the beneficiary is not related as outlined for Group A or Group B.

The thresholds for gifts and inheritances taken on or after 14 October 2015 are:

• Group A €280,000

• Group B €30,150

• Group C €15,075

The Group A threshold for gifts and inheritances taken between 6 December 2012 and 13 October 2015 was €225,000. Different threshold amounts apply to each group for gifts and inheritances taken before 6 December 2012.

Self-assessment - payment and returnsSelf-assessment applies to gift and inheritance tax. The pay and file date is 31 October for gifts and inheritances which have a valuation date falling in the 12 month period ending on the previous 31 August. The obligation to file a return only applies where 80% of the group threshold is exceeded and the return is filed by tions

Subject to certain conditions, the following are exempt from CAT:

• the first €3,000 of gifts taken by a beneficiary from any one disponer in a calendar year

• gifts and inheritances between spouses and civil partners

• transfers of property by virtue of any order under the Family Law Acts 1995 or 1996 in relation to a divorce/dissolution



GeneralCapital acquisitions tax (“CAT”) comprises principally gift and inheritance tax. CAT applies in the case of a person becoming beneficially entitled to property, either by way of a gift or on a death, for less than full consideration. The charge to CAT for gifts or inheritances will generally arise where:

• the disponer (the person providing thebenefit) is resident or ordinarily resident inIreland, or

• the beneficiary is resident or ordinarilyresident in Ireland, or

• the subject matter of the gift or inheritanceis situated in Ireland

Special rules apply to non-domiciled disponers and benefi iaries.

Calculation of CATGifts or inheritances taken on or after 5 December 1991 from disponers within the same group threshold (see below) must be taken into account when calculating CAT. These gifts or inheritances serve to reduce, or cancel out, the amount of the tax free threshold available. From 6 December 2012 amounts in excess of the threshold are taxed at 33% (previously 30%).

There are three categories which are based on the relationship between the disponer and the benefi iary:

Group A

Applies where the beneficiary is a child or minor child of a deceased child of the disponer, or a foster child (subject to certain conditions) of the disponer, or a child of the civil partner of the disponer, or a minor child of a deceased child’s civil partner. This threshold also applies to inheritances taken by a parent from a deceased child, subject to certain exceptions.

Group B

Applies where the beneficiary is a lineal ancestor, lineal descendant (other than a child, or minor child of a deceased child), a brother, sister, or a child of a brother or sister of the disponer, or a child of a civil partner of a brother or sister of the disponer.

Group C

Applies where the beneficiary is not related as outlined for Group A or Group B.

The thresholds for gifts and inheritances taken on or after 12 October 2016 are:

• Group A €310,000

• Group B €32,500

• Group C €16,250

The Group A threshold for gifts and inheritances taken between 14 October 2015 and 12 October 2016 was €280,000, the Group B threshold was €30,150 and the Group C threshold was €15,075. Different threshold amounts apply to each group for gifts and inheritances taken before 14 October 2015.

Self-assessment - payment and returnsSelf-assessment applies to gift and inheritance tax. The pay and file date is 31 October for gifts and inheritances which have a valuation date falling in the 12 month period ending on the previous 31 August. The obligation to file a return only applies where 80% of the group threshold is exceeded and the return is filed by the beneficiary.

Planning tip!

Make use of reduced asset values to transfer wealth to the next generation at a lower tax cost or, where certain reliefs apply, at no tax cost. Remember, you can transfer wealth to the next generation while retaining control over the assets transferred.

Main exemptionsSubject to certain conditions, the following are exempt from CAT:

• the first €3,000 of gifts taken by a beneficiary from any one disponer in a calendar year

• gifts and inheritances between spouses andcivil partners

• transfers of property by virtue of any orderunder the Family Law Acts 1995 or 1996 inrelation to a divorce/dissolution

• transfers of property by virtue of any orderunder the Cohabitants Act 2010 in relationto the break-up of a relationship



Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax

Local taxes

Customs and excise

Tax contacts



Introduction


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax

Local taxes

Customs and Excise

Tax contacts



Introduction

62Tax Facts 2017

• transfers of property by virtue of any order under the Cohabitants Act 2010 in relation to the break-up of a relationship

• a gift or inheritance consisting of a dwelling house that is the only or main residence of the beneficiary

• the proceeds of certain life policies

• gifts or inheritances for public or charitable purposes

• certain receipts by a child of the disponer, a child of a civil partner of the disponer, or a person to whom the disponer stands in loco parentis, for support, maintenance and education where the child is under 18, or under 25 if they remain in full-time education.

Main reliefs• Business relief: a 90% reduction in the

market value of a benefit can be applied if the benefit consists of relevant business property (such as unincorporated businesses, shares in certain family companies) where certain conditions are met.

• Agricultural relief: a 90% reduction in the market value of agricultural property (such as agricultural land, livestock and machinery) can be applied where certain conditions are met. For gifts and inheritances taken up to 31 December 2014, the main test for this relief was for the recipient to show that at least 80% of the value of his/her assets after taking the gift/

inheritance was made up of agricultural assets. With effect from 1 January 2015, in addition to the 80% asset test, there is a new “active farmer” requirement. It is important that beneficiaries ensure that this condition is met when claiming the relief.

Discretionary trustThere is a once-off levy of 6% on certain discretionary trusts (and similar entities such as foundations) which may, in particular circumstances, be reduced to 3%. At present the levy becomes payable on the latest of the following events:

• the date the property is placed in trust*

• the date of death of the settlor

• the date on which the youngest principal object of the trust attains the age of 21. *Property will be treated as being subject to a discretionary trust on the date of death of the disponer where the discretionary trust is created in the disponer’s will.

Discretionary trusts (and similar entities such as foundations) which are liable to the once-off levy are also liable to an annual levy of 1%.



• an inheritance consisting of a dwellinghouse that is the only or main residence ofthe donor at the time of their death and theonly or main residence of the beneficiary forthree years immediately prior to the date ofthe inheritance

• a gift consisting of a dwelling house that isthe only or main residence of thebeneficiary who is a dependent relative ofthe donor.

• the proceeds of certain life policies

• gifts or inheritances for public or charitablepurposes

• certain receipts by a child of the disponer, achild of a civil partner of the disponer, or aperson to whom the disponer stands in locoparentis, for support, maintenance andeducation where the child is under 18, orunder 25 if they remain in full-time edu

Main reliefs• Business relief: a 90% reduction in the

market value of a benefit can be applied ifthe benefit consists of relevant businessproperty (such as unincorporatedbusinesses, shares in certain familycompanies) where certain conditions aremet.

• Agricultural relief: a 90% reduction in themarket value of agricultural property (suchas agricultural land, livestock andmachinery) can be applied where certainconditions are met. For gifts andinheritances taken up to 31 December 2014,the main test for this relief was for therecipient to show that at least 80% of the

value of his/her assets after taking the gift/inheritance was made up of agricultural assets. With effect from 1 January 2015, in addition to the 80% asset test, there is a new “active farmer” requirement. It is important that beneficiaries ensure that this condition is met when claiming the relief.

Discretionary trustThere is a once-off levy of 6% on certain discretionary trusts (and similar entities such as foundations) which may, in particular circumstances, be reduced to 3%. At present the levy becomes payable on the latest of the following events:

• the date the property is placed in trust*

• the date of death of the settlor

• the date on which the youngest principalobject of the trust attains the age of 21.

*Property will be treated as being subject to a discretionary trust on the date of death of thedisponer where the discretionary trust is created in the disponer’s will.

Discretionary trusts (and similar entities such as foundations) which are liable to the once-off levy are also liable to an annual levy of 1%.

Planning tip!

Consider the impact of inheritance tax when planning your will. You should ensure that your will is tax efficient. Remember that separate wills are needed for foreign assets.


Contact us:

Tim O’Rahilly Partner t: 353 1 792 6862 e: [email protected]

Beryl Power Senior Manager t: 353 1 792 6285 e: [email protected]

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax

Local taxes

Customs and excise

Tax contacts



Introduction


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax

Local taxes

Customs and Excise

Tax contacts



Introduction


63Tax Facts 2017

Local taxes known as ‘rates’ are not based on income but rather are levied on the occupiers of business property by reference to a deemed rental value of the property concerned. The level of rates levied can depend on the region in which the property is located. Rates are an allowable deduction for corporation tax purposes.

Local authorities are also empowered to levy charges on all occupiers for specific services (e.g. water supply). These charges are also deductible for corporation tax purposes.

Carbon Tax

Emissions allowances

Irish tax legislation contains provisions dealing with the tax treatment of emission allowances under the EU Emissions Trading Scheme. The legislation distinguishes between allowances acquired free of charge from the Environment Protection Agency under the EU Scheme and those which are purchased.

Allowances which are purchased are treated as trading assets, subject to corporation tax treatment. Allowances which are acquired free of charge are subject to capital gains tax treatment.

Environmental taxes

In Ireland, a levy (currently 22 cent per bag) is imposed upon consumers provided with a plastic bag when purchasing goods in supermarkets and other retail outlets. Under the applicable legislation, retailers are obliged

to collect 22 cent in respect of every plastic bag or bag containing plastic, regardless of size, unless specifically exempted, that is provided to customers and remit all plastic bag levies collected to Irish Revenue. As a result of the levy, most non-supermarket retailers provide paper carrier bags, and many supermarket retailers offer for sale ‘bags for life’ (i.e. re-usable bags), which are not subject to the environmental levy.

Carbon tax

Ireland levies a carbon tax on mineral oils (e.g. auto fuels, kerosene) which are supplied in Ireland. The rate of carbon tax broadly equates to EUR 20 per tonne of CO2 emitted. Relief applies where mineral oils are supplied to Emissions Trading Scheme (ETS) installations, to combined heat and power plants or for electricity generation. Relief also applies to biofuels.

Carbon tax also applies to natural gas and solid fuel where supplied for combustion. Again, reliefs apply where these fuels are supplied to ETS installations, CHP plants, for electricity generation or for use in chemical reduction, electrolytical or metallurgical processes.

Reliefs also apply for solid fuels which contain a high biomass content. The relief will be determined by reference to the level of biomass content of the solid fuel.

Local taxes


Local taxes known as ‘rates’ are not based on income but rather are levied on the occupiers of business property by reference to a deemed rental value of the property concerned. The level of rates levied can depend on the region in which the property is located. Rates are an allowable deduction for corporation tax purposes.

Local authorities are also empowered to levy charges on all occupiers for specific services (e.g. water supply). These charges are also deductible for corporation tax purposes.

Environmental Taxes

Emissions allowances

Irish tax legislation contains provisions dealing with the tax treatment of emission allowances under the EU Emissions Trading Scheme. The legislation distinguishes between allowances acquired free of charge from the Environment Protection Agency under the EU Scheme and those which are purchased.

Allowances which are purchased are treated as trading assets, subject to corporation tax treatment. Allowances which are acquired free of charge are subject to capital gains tax treatment.

Carbon tax

Ireland levies a carbon tax on mineral oils (e.g. auto fuels, kerosene) which are supplied in Ireland. The rate of carbon tax broadly equates to EUR 20 per tonne of CO2 emitted. Relief applies where mineral oils are supplied

to Emissions Trading Scheme (ETS) installations, to combined heat and power plants or for electricity generation. Relief also applies to biofuels.

Carbon tax also applies to natural gas and solid fuel where supplied for combustion. Again, reliefs apply where these fuels are supplied to ETS installations, CHP plants, for electricity generation or for use in chemical reduction, electrolytical or metallurgical processes.

Reliefs also apply for solid fuels which contain a high biomass content. The relief will be determined by reference to the level of biomass content of the solid fuel.

Plastic Bag Tax

In Ireland, a levy (currently 22 cent per bag) is imposed upon consumers provided with a plastic bag when purchasing goods in supermarkets and other retail outlets. Under the applicable legislation, retailers are obliged to collect 22 cent in respect of every plastic bag or bag containing plastic, regardless of size, unless specifically exempted, that is provided to customers and remit all plastic bag levies collected to Irish Revenue. As a result of the levy, most non-supermarket retailers provide paper carrier bags, and many supermarket retailers offer for sale ‘bags for life’ (i.e. re-usable bags), which are not subject to the environmental levy.

Local taxes

Contact us:

Ronan MacNioclais Partner t: 353 1 792 6006 e: [email protected]

Mary Douglas Director t: 353 1 792 7024 e: [email protected]

Local taxes

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Customs and excise

Tax contacts



Introduction

Local taxes

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Customs and Excise

Tax contacts



Introduction

64Tax Facts 2017

CustomsGoods imported into Ireland from countries outside the European Union (“EU”) are liable to customs duty at the appropriate rates specified in the EU’s Combined Nomenclature (CN) Tariff. These rates vary from 0% to 14% for industrial goods, with much higher rates applicable to agricultural products. Imports may qualify for a partial or full reduction in rates in specific circumstances.

The three main elements (“customs duty drivers”) that determine the duty liability arising on goods imported into the EU from a non-EU country are (i) the product’s commodity code (Tariff Classification); (ii) its customs valuation; and (iii) its origin. Each of these elements will need to be considered when determining the customs duty cost at import.

There are special customs procedures which allow for the import of goods into the EU from non-EU countries with full or partial relief from customs duty or under a suspension of customs duty. Examples of these are Customs Warehousing, Inward Processing Relief, Processing under Customs Controls and Outward Processing Relief. There are different conditions attached to each customs special procedure and an analysis of the trade footprint of the importer of the goods will need to be considered in order to determine whether or not they may avail of one of these reliefs. These procedures are important and are in place with the intention of stimulating economic activity within the EU.

It should be noted that no customs duties arise on goods “imported” from other EU Member States provided they originate in the EU or have been customs cleared in another Member State of the EU.

ExciseExcise duties are charged on mineral oils (including petrol and diesel), alcohol products (including spirits, beer, wine, cider and perry) and tobacco products where they are consumed in Ireland. Reduced rates of excise duty may apply when setting up a microbrewery in Ireland (depending on production quantities).

In addition, a diesel rebate scheme was recently introduced in Ireland . It provides hauliers or coach/bus owners with an opportunity to claim a partial refund of excise duty paid on fuel used in specifically designated vehicles for the purposes of transporting goods or passengers.

Excise duties are not charged on the export or sale of excisable goods to other EU countries but special control arrangements apply to the intra-EU movement of such goods.

In addition, Ireland applies excise duties to electricity, betting and the first registration of vehicles in the State (the latter is known as VRT). The current VRT regime for motor vehicles is based on a CO2 emissions rating system and charged on the “open market selling price” of the vehicle. Specific reductions in VRT apply to electric and hybrid vehicles subject to certain conditions being met. In addition there are reliefs available for cars imported temporarily by non-residents, or imported on transfer of residence to Ireland (such VRT reliefs require prior approval from the Customs authorities).

Customs and Excise


Contact us:

John O’Loughlin Director t: 353 1 792 6093 e: [email protected]

CustomsGoods imported into Ireland from countries outside the European Union (“EU”) are liable to customs duty at the appropriate rates specified in the EU’s Combined Nomenclature (CN) Tariff. These rates vary from 0% to 14% for industrial goods, with much higher rates applicable to agricultural products. Imports may qualify for a partial or full reduction in rates in specific circumstances.

The three main elements (“customs duty drivers”) that determine the duty liability arising on goods imported into the EU from a non-EU country are (i) the product’s commodity code (Tariff Classification); (ii) its customs valuation; and (iii) its origin. Each of these elements will need to be considered when determining the customs duty cost at import.

There are special customs procedures which allow for the import of goods into the EU from non-EU countries with full or partial relief from customs duty or under a suspension of customs duty. Examples of these are Customs Warehousing, Inward and/or Outward Processing Relief End Use, and Temporary Admission. There are different conditions attached to each customs special procedure and an analysis of the trade footprint of the importer of the goods will need to be considered in order to determine whether or not they may avail of one of these reliefs. These procedures are important and are in place with the intention of stimulating economic activity within the EU.

ExciseExcise duties are charged on mineral oils (including petrol and diesel) used for propulsion or heating purposes, alcohol products (including spirits, beer, wine, cider and perry) and tobacco products where they are consumed in Ireland. Reduced rates of excise duty may apply when setting up a microbrewery in Ireland (depending on production quantities). Natural gas and biogas used as vehicle gas will also become liable to excise duty in the near future.

In addition, a diesel rebate scheme was recently introduced in Ireland. It provides hauliers or coach/bus owners with an opportunity to claim a partial refund of excise duty paid on fuel used in specifically designated vehicles for the purposes of transporting goods or passengers.

Excise duties are not charged on the export or sale of excisable goods to other EU countries but special control arrangements apply to the intra-EU movement of such goods.

In addition, Ireland applies excise duties to electricity, betting and the first registration of vehicles in the State (the latter is known as VRT). The current VRT regime for motor vehicles is based on a CO2 emissions rating system and charged on the “open market selling price” of the vehicle. Specific reductions in VRT apply to electric and hybrid vehicles subject to certain conditions being met. In addition there are reliefs available for cars imported temporarily by non-residents,

or imported on transfer of residence to Ireland (such VRT reliefs require prior approval from the Customs authorities).

Customs and Excise

Local taxes

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Customs and excise

Tax contacts



Introduction

Customs and Excise

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Tax contacts



Introduction

65Tax Facts 2017

Tax contacts

Tax & Legal Services Leader

Joe Tynan

Business taxation

Alan Bigley Private Clients Pensions

Paraic Burke Domestic & International Structuring Consumer Products & Retail

Marie Coady Financial Services & International Structuring

Jean Delaney Inward Investment & International Structuring Customs & Trade

Liam Diamond Inward Investment & International Structuring

Enda Faughnan Financial Services & International Structuring Real Estate

Ronan Finn Transfer Pricing

Denis Harrington Inward Investment & International Structuring

Mary Honohan Inward Investment & International Structuring, Consumer Products & Retail

Susan Kilty Inward Investment & International Structuring, Technology, InfoComms, Entertainment & Media, Global Compliance Services

Brian Leonard Financial Services & International Structuring Aviation Leasing

Ronan MacNioclais Domestic & International Structuring, Carbon Tax, Energy & Renewables, Mergers & Acquisitions

Teresa McColgan Private Companies, Not-for-Profit, Health & Education

Jim McDonnell Financial Services & International Structuring

James McNally Company Administration Services, Payroll, Pharmaceuticals

John Murphy Domestic & International Structuring, Technology Companies, Mergers & Acquisitions

Carmel O’Connor EU Taxes, Consumer Products & Retail

Terry O’Driscoll Domestic & International Structuring, Consumer Products & Retail, Mergers & Acquisitions

John O’Leary Financial Services & International Structuring

Tim O’Rahilly Private Clients, Real Estate


Tax contacts

Tax & Legal Services Leader

Joe Tynan

Business taxation

Alan Bigley Private Clients Pensions

Paraic Burke Domestic & International Structuring Consumer Products & Retail

Marie Coady Financial Services & International Structuring

Jean Delaney Inward Investment & International Structuring Customs & Trade

Liam Diamond Inward Investment & International Structuring

Enda Faughnan Financial Services & International Structuring Real Estate

Ronan Finn Transfer Pricing

Denis Harrington Inward Investment & International Structuring

Brian Leonard Financial Services & International Structuring Aviation Leasing

Ronan MacNioclais Domestic & International Structuring, Carbon Tax, Energy & Renewables, Mergers & Acquisitions

Teresa McColgan Private Companies, Not-for-Profit, Health & Education

Jim McDonnell Financial Services & International Structuring

James McNally Tax Reporting, Strategy and Corporate Tax Compliance, Pharmaceuticals

Stephen Merriman R&D Tax Credits

John Murphy Domestic & International Structuring, Technology Companies, Mergers & Acquisitions

Carmel O’Connor EU Taxes, Consumer Products & Retail, Payroll, Company Administration Services

Terry O’Driscoll Domestic & International Structuring, Consumer Products & Retail, Mergers & Acquisitions

Munro O’Dwyer Corporate Pensions

Tim O’Rahilly Private Clients, Real Estate

Gavan Ryle Transfer Pricing

Colin Smith Domestic & International Structuring, Industrial and Consumer Products, Technology and Retail

Yvonne Thompson Financial Services & International Structuring, Aviation Leasing

Joe Tynan Inward Investment & International Structuring, Technology, InfoComms, Entertainment & Media, R&D Tax Credits, Intellectual Property

John O’Leary Financial Services & International Structuring

Harry HarrisonInward Investment & International Structuring

Mary Honohan Inward Investment & International Structuring, Consumer Products & Retail

Susan Kilty Inward Investment & International Structuring, Technology, InfoComms, Entertainment & Media, Global Compliance Services

Tax contacts

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise



Introduction

Tax contacts

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise



Introduction

66Tax Facts 2017

Tax contacts

Individual taxation

Mark Carter Employment Taxes, Global Mobility, HR Services

Pat Mahon Employment Taxes, Share Incentive Schemes, Revenue Audits

Mary O’Hara Employment Taxes, Reward, Workforce Reshaping

VAT

Sean Brodie

Tom Corbett

John Fay

Caroline McDonnell

Cork

Nicola Quinn

Mid West

Anita Kissane

South East

Ronan Furlong

Dublin

One Spencer Dock, North Wall Quay, Dublin 1 Tel: +353 (0) 1 792 6000

Cork

1 South Mall, Cork Tel + 353 (0) 21 427 6631 Fax + 353 (0) 21 427 6630

Galway

Harris House, IDA Small Business Centre, Tuam Road, Galway Tel + 353 (0) 91 764 620 Fax + 353 (0) 91 764 621

Kilkenny

Leggetsrath Business Park, Dublin Road, Kilkenny Tel + 353 (0) 56 770 4900 Fax + 353 (0) 56 776 5962

Limerick

Bank Place, Limerick Tel + 353 (0) 61 212 300 Fax + 353 (0) 61 416 331

Waterford

Ballycar House, Newtown, Waterford Tel + 353 (0) 51 874 858 Fax + 353 (0) 51 872 312

Wexford

Cornmarket, Wexford Tel + 353 (0) 53 915 2400 Fax + 353 (0) 53 915 2440


Tax contacts

Individual taxation

Mark Carter Employment Taxes, Global Mobility, HR Services

Pat Mahon Employment Taxes, Share Incentive Schemes, Revenue Audits

Mary O’Hara Employment Taxes, Reward, Workforce Reshaping

VAT

Sean Brodie

Tom Corbett

John Fay

Caroline McDonnell

Cork

Nicola Quinn

Mid West

Anita Kissane

South East

Ronan Furlong

Dublin

One Spencer Dock, North Wall Quay, Dublin 1 Tel: +353 (0) 1 792 6000

Cork

1 South Mall, Cork Tel + 353 (0) 21 427 6631 Fax + 353 (0) 21 427 6630

Galway

Harris House, IDA Small Business Centre, Tuam Road, Galway Tel + 353 (0) 91 764 620 Fax + 353 (0) 91 764 621

Kilkenny

Leggetsrath Business Park, Dublin Road, Kilkenny Tel + 353 (0) 56 770 4900 Fax + 353 (0) 56 776 5962

Limerick

Bank Place, Limerick Tel + 353 (0) 61 212 300 Fax + 353 (0) 61 416 331

Waterford

Ballycar House, Newtown, Waterford Tel + 353 (0) 51 874 858 Fax + 353 (0) 51 872 312

Wexford

Cornmarket, Wexford Tel + 353 (0) 53 915 2400 Fax + 353 (0) 53 915 2440

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise



Introduction

Tax contacts

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise



Introduction

Tax contacts

67Tax Facts 2017

Appendix 1

Withholding tax on payments from Ireland


Note 1: Domestic legislation may also provide an exemption from the dividend withholding tax subject to providing the necessary documentary evidence of qualification. An exemption may also be available under the EU Parent-Subsidiary Directive.

Note 2: The EU Interest and Royalties Directive may provide an exemption from withholding tax for payments between associated companies.

Note 3: In general, in the case of royalties withholding tax applies only to patent royalties.

Note 4:

paid in the course of a trade or business to a company resident in an EU or treaty country and that country imposes a tax that generally applies to foreign interest receivable.

Note 5: As of 1 January 2015 treaty but is not yet in force.

Country Dividends Interest Royalties

% % %

Non-Treaty Countries 20 20 20

Albania 0/5/10 0/7 7

Armenia 0/5/15 0/5/10 5

Australia 0 10 10

Austria 0 0 0

Bahrain 0 0 0

Belarus 0/5/10 0/5 5

Belgium 0 15 2 0

Bosnia Herzegovina 0 0 0

Botswana 5 0/5 0/7.5 0/7.5

Bulgaria 5/10 0/5 2 10 2

Canada 5/15 0/10 0/10

Chile 5/15 5/15 5/10

China 5/10 0/10 6/10

Croatia 5/10 0 10 2

Cyprus 0 0 0/5 2

Czech Republic 5/15 0 10 2

Denmark 0 0 0

Egypt 5/10 0/10 10

Estonia 5/15 0/10 2 5/10 2

Ethiopia 5 5 0/5 5

Finland 0 0 0

France 20 0 0

Georgia 0/5/10 0 0

Germany 5/15 0 0

Greece 5/15 5 2 5 2

Hong Kong 0 0/10 3


% % %

Hungary 5/15 0 0

Iceland 5/15 0 0/10

India 10 0/10 10

Israel 0 5/10 10

Italy 15 10 2 0

Japan 0 10 10

Korea (Republic of) 0 0 0

Kuwait 0 0 5

Latvia 5/15 0/10 2 5/10 2

Lithuania 5/15 0/10 2 5/10 2

0

Macedonia 0/5/10 0 0

Malaysia 10 0/10 8

Malta 5/15 0 5 2

Mexico 5/10 0/5/10 10

Moldova 5/10 0/5 5

Montenegro 0/5/10 0/10 5/10

Morocco 6/10 0/10 10

Netherlands 0/15 0 0

New Zealand 0 10 10

Norway 0/5/15 0 0

Pakistan 5/10 0

Panama 5 0/5 5

Poland 0/15 0/10 2 10 2

Portugal 15 0/15 2 10 2

Qatar 0 0 5

Appendix 1

Withholding tax on payments from Ireland

0/10

Luxembourg 0 0


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts


Introduction


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts


Introduction

68Tax Facts 2017

Appendix 1

Withholding tax on payments from Ireland (continued)


Appendix 1

Withholding tax on payments from Ireland (continued)


% % %

Romania 3 0/3 2 0/3 2

Russia 10 0 0

Saudi Arabia 0/5 0 5/8

Serbia 5/10 0/10 5/10

Singapore 0 0/5 5

Slovak Republic 0/10 0 0/10 2

Slovenia 5/15 0/5 2 5 2

South Africa 5/10 0 0

Spain 0 0 5/8/10 2

Sweden 0 0 0

Switzerland 0 0 0

Thailand 10 0/10/15 5/10/15

Turkey 5/15 10/15 10

Ukraine 5/15 5/10 5/10

United Arab Emirates 0 0 0

United Kingdom 5/15 0 0

United States 5/15 0 0

Uzbekistan 5/10 5 5

Vietnam 5/10 0/10 5/10/15

Zambia 7.5 0/10 8/10

Note 1: Domestic legislation may also provide an exemption from the dividend withholding tax subject to providing the necessary documentary evidence of qualification. An exemption may also be available under the EU Parent-Subsidiary Directive.

Note 2: The EU Interest and Royalties Directive may provide an exemption from withholding tax for payments between associated companies.

Note 3: In general, in the case of royalties withholding tax applies only to patent royalties.

Note 4: Under domestic legislation withholding tax will not apply if the loans or advances are for a period of less than one year or if the interest is paid in the course of a trade or business to a company resident in an EU or treaty country and that country imposes a tax that generally applies to foreign interest receivable.

Note 5: Treaty in effect from 1 January 2017.

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts


Introduction


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts


Introduction


69Tax Facts 2017

Withholding tax on payments to Ireland

Appendix 2



% % %

Albania 0/5/10 0/7 7

Armenia 0/5/15 0/5/10 5

Australia 15 10 10

Austria 10 1 0 0/10 2

Bahrain 0 0 0

Belarus 0/5/10 0/5 5

Belgium 15 1 15 2 0

Bosnia Herzegovina 0 0 0

Botswana 5 0/5 0/7.5 0/7.5

Bulgaria 5/10 1 0/5 2 10 2

Canada 5/15 0/10 0/10

Chile 5/15 5/15 5/10

China 5/10 0/10 6/10

Croatia 5/10 0 10 2

Cyprus 0 0 0/5 2

Czech Republic 5/15 1 0 10 2

Denmark 0/15 1 0 0

Egypt 5/10 0/10 10

Estonia 5/15 1 0/10 2 5/10 2

Ethiopia 5 5 0/5 5

Finland 0/15 1 0 0

France 10/15 1 0 0

Georgia 0/5/10 0 0

Germany 5/15 1 0 0

Greece 5/15 1 5 2 5 2

Hong Kong 0 0/10 3

Hungary 5/15 1 0 0

Iceland 5/15 0 0/10


% % %

India 10 0/10 10

Israel 10 5/10 10

Italy 15 1 10 2 0

Japan 10/15 10 10

Korea (Republic of) 10/15 0 0

Kuwait 0 0 5

Latvia 5/15 1 0/10 2 5/10 2

Lithuania 5/15 1 0/10 2 5/10 2

Luxembourg 5/15 1 0 0

Macedonia 0/5/10 0 0

Malaysia 10 0/10 8

Malta 5/15 1&3 0 5 2

Mexico 5/10 0/5/10 10

Moldova 5/10 0/5 5

Montenegro 0/5/10 0/10 5/10

Morocco 6/10 0/10 10

Netherlands 0/15 1 0 0

New Zealand 15 10 10

Norway 0/5/15 0 0

Pakistan 10 0/10 0

Panama 5 0/5 5

Poland 0/15 1 0/10 2 10 2

Portugal 15 1 0/15 2 10 2

Qatar 0 0 5

Romania 3 1 0/3 2 0/3 2

Russia 10 0 0

Saudi Arabia 0/5 0 5/8

Withholding tax on payments to Ireland

Appendix 2


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts


Introduction


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts


Introduction

70Tax Facts 2017

Appendix 2

Withholding tax on payments to Ireland (continued)



% % %

Serbia 5/10 0/10 5/10

Singapore 0 0/5 5

Slovak Republic 0/10 1 0 0/10 2

Slovenia 5/15 1 0/5 2 5 2

South Africa 5/10 0 0

Spain 0/15 1 0 5/8/10 2

Sweden 5/15 1 0 0

Switzerland 5/10/15 0 0

Thailand 10 0/10/15 5/10/15

Turkey 5/10/15 10/15 10

Ukraine 5/15 5/10 5

United Arab Emirates 0 0 0

United Kingdom 5/15 4 0 0

United States 5/15 0 0

Uzbekistan 5/10 5 5

Vietnam 5/10 0/10 5/10/15

Zambia 7.5 0/10 8/10

Note 1: A complete exemption from dividend withholding tax may be available under the EU Parent-Subsidiary Directive.

Note 2: A complete exemption from interest and royalty withholding tax may be available under the EU Interest and Royalties Directive.

Note 3: Malta tax on gross amount of the dividend shall not exceed that chargeable on the profits out of which the dividends are paid.

Note 4: The UK does not operate dividend withholding tax.

Note 5: Treaty in effect from 1 January 2017.

Appendix 2

Withholding tax on payments to Ireland (continued)

Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and excise

Tax contacts


Introduction


Index

Welcome

Business taxation

Transfer Pricing

Financial Services


Tax treaties


Stamp duty


Interest

Local Property Tax

Income tax

Employee taxation


PRSI


Pension schemes

Capital gains tax


Local taxes

Customs and Excise

Tax contacts


Introduction


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